NZ market rallies on US banking assurances

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New Zealand and other offshore sharemarkets rallied after United States regulators took quick action to stem a widespread banking crisis.

Monday, March 13th 2023, 6:47PM 2 Comments

by BusinessDesk

The S&P/NZX 50 Index recovered late in the day and closed at 11,672.9, down 54.14 points or 0.46% after reaching an intraday low of 11,543.58 following the collapse of Silicon Valley Bank (SVB) and New York's Signature Bank.

The index, however, is back to the same level it was at the start of the year – it sat at 11,664.87 points on January 12. 

There were 92 decliners and 42 gainers over the whole market on volume of 27.15 million share transactions worth $902.55 million. 

Technology-focussed lender SVB, the 16th-largest bank in the US, went into receivership following losses in its bond portfolio, prompting the biggest bank failure since the global financial crisis in 2008 and sending shockwaves through the banking sector. 

Matt Goodson, managing director of Salt Funds Management, said the action taken by the US Treasury, Federal Reserve and Federal Deposit Insurance Corp has been sensible and a systematic banking failure appeared to be low. 

“The regulators have wiped out the equity holders and unsecured bondholders in the two banks but have ensured that depositors will get their money back through the sale of loans and bond assets and bring an end to the run [on the banks]." 

Monetary policy

Goodson said the central banks have to take some of the blame, for reducing interest rates to zero or near to it and providing incentives for borrowing and risk-taking.

 “It’s a failure in monetary policy that comes back and bites you. People were expecting the Federal Reserve to increase interest rates a further 50 basis points, but now they expect 25 basis points or nothing,” he said. 

After another sell-off on Wall Street (Saturday morning, NZ time), US stock futures were up 1.57% before the markets re-open overnight. Across the Tasman, the S&P/ASX 200 Index was down as much as 0.8% before recovering to 7111.2 points, down 0.47% at 6pm NZ time. 

NZ-bred merino footwear retailer Allbirds plunged 47% to US$1.25 (NZ$2.01) on the Nasdaq Composite after reporting disappointing holiday sales and widening its net loss to US$24.9m.

The company has lost US$101m in its first year as a public company, and its share price has fallen 95% from a peak of US$26.76. It has gone from a multibillion-dollar company to one worth US$200m.

Two NZ-listed stocks had business with SVB and will receive their money back. 

Comvita, down 1c to $3.35 after turning around from an intraday low of $3.21, told the market its US skincare joint venture Caravan Honey had US$2.5m deposited with SVB. 

Likewise, ikeGPS has US$3.2m deposited and its share price decreased 2c or 2.13% to 92c. 

Other local technology companies Rakon (falling 4c or 4.3% to 89c), Vista Group (down 2c to $1.34), Serko (gaining 7c or 3.11% to $2.32) and AoFrio (formerly Wellington Drive Technologies, unchanged at 11.1c) said they had no exposure to SVB. 

US-listed Rocket Lab, an entrepreneurial favourite for NZ, has $US38m or 7.9% of its total cash reserves deposited with SVB and in after-hours trading its share price had fallen 4.17% to US$3.85 – well below its high of US$18.69 achieved in early September 2021. 

Marlin Global Fund, down 4c or 4.35% to 88c, has 3.3% of its offshore investment in Signature Bank, which is now under Federal Deposit Insurance Corp control “in order to stabilise the banking system". The move protects deposit holders but not shareholders. 

Amongst the leading stocks, Fisher and Paykel Healthcare was down 46c or 1.79% to $25.25; Mainfreight declined 58c to $69.90; Chorus gave up 6c to $7.82; and SkyCity fell 10c or 4.1% to $2.34. 

Fletcher Building was down 11c or 2.38% to $4.52 after telling the market it has been served with a shareholder class action filed in the Victoria Supreme Court. The legal action relates to Fletcher’s disclosures about its building and interiors business between August 17, 2016, and October 23, 2017, and shares bought by investors during that period. 

Skellerup Holdings declined 8c to $5; Restaurant Brands was down 17c or 2.65% to $6.24; Air NZ decreased 1c to 79c; Gentrack shed 12c or 4.27% to $2.69; and Sky TV was down 5c or 2% to $2.45. 

The leading banking stocks were largely unaffected, though Heartland Group declined 7c or 4.05% to $1.66. ANZ was down 17c to $25.35, and Westpac declined 28c to $23.15. Geneva Finance fell 4.5c or 12.68% to 31c. 

Heartland is mourning the death of founding director Geoffrey Ricketts who was the board chair from 2013 to February this year. 

Amongst the gainers, Mercury Energy improved 10c to $6.35; Port of Tauranga climbed 11c or 1.8% to $6.23; Argosy Property was up 1.5c to $1.155; NZME increased 2c or 1.85% to $1.10; and Private Land and Property Fund rose 6c or 4.72% to $1.33.

Tags: Market Close

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