NZX rebounds after rough start to day on bank fears

The New Zealand sharemarket’s nerves were soothed by a bumper profit from Fonterra and a new $1.6 billion takeover bid for Pushpay following another offshore banking scare and looming recession at home.

Thursday, March 16th 2023, 6:37PM

by BusinessDesk

The S&P/NZX 50 Index fell sharply at the opening on concerns about the outlook for Switzerland’s second-largest bank Credit Suisse, with its share price falling 24%.

But following the Fonterra and Pushpay news the index found a spring in its step, rebounding impressively from a midday low of 11,529.95 and closing with a gain of 81.74 points or 0.7% to 11,699.02. It was the biggest single-day rise for the index this month.

There were 61 gainers and 68 decliners over the whole market on volume of 65.34 million share transactions worth $189.42 million, led by hectic trading in Pushpay.

The NZ economy contracted 0.6% in the fourth quarter ending December, much weaker than the Reserve Bank’s forecast of a gain of 0.7% in the gross domestic product (GDP). The third quarter (ending September) rise was revised slightly lower from 2% to 1.7%.

Greg Smith, head of retail with Devon Funds Management, said there was ironic relief on the market with the weaker-than-expected GDP number. “The economy has slowed more than the bank thought and it may be inclined to dial back its next official cash rate hike from 50 basis points to 25.”

Smith said the latest GDP number sets NZ up to enter a technical recession (two consecutive quarters of negative growth) earlier than expected, given the March quarter will be weak due to the floods and cyclone.

On Wall Street, the Dow Jones Industrial Average was down 0.87% to 31,874.57 points and S&P 500 declined 0.7% to 3891.93 after Credit Suisse said it had found “certain material weaknesses in our internal control over financial reporting” for 2021 and 2022.

Its largest investor Saudi National Bank said it could no longer provide any more funding and the Swiss central bank announced it would give Credit Suisse liquidity if required.

Dairy profit

NZ’s biggest company Fonterra Co-operative reported a 50% surge in net profit to $546m for the six months ending January on the back of higher prices for protein products. Revenue was up 23% to $13.25 billion.

Fonterra Shareholders’ Fund rose 25c or 8.2% to $3.30. Fonterra is paying an interim dividend of 10c a share on April 14, alongside a forecast milk price of $8.20-$8.80 per kgMS. The co-operative upgraded its full-year earnings to 55-75c a share, from 50-70c, and announced a tax-free capital return to farmer-owners and unit holders of 50c a share worth a total of $800m, subject to completing the sale of the Chilean Soprole business.

Donor software management company Pushpay Holdings topped the individual gainers and trading lists after telling the market it has received an improved takeover bid from investment firms Sixth Street and BGH Capital, at $1.42 per share and up from $1.34.

Pushpay climbed 17c or 13.82% to $1.40 with 34.42 million shares worth $48.05m changing hands. This time the takeover looks like going through at the next shareholders’ meeting.

Pushpay said seven of its largest NZ institutional shareholders holding 18.6% including ACC and NZ Super Fund – which voted against the initial offer – have indicated they will vote in favour of the new scheme of arrangement.

Smith said the higher takeover offer lined up better with the independent valuation report and “what’s interesting is that the arbitrage hedge funds, which bought in after the initial offer, are effectively subsidising the higher offer.”

Auckland international airport increased 19c or 2.21% to $8.77 after telling the market it is now operating up to 73% of pre-covid levels, with 1.427 million passengers moving through the terminals in January and 1.258 million in February.

Meridian was up 11c or 2.17% to $5.18; Contact also gained 11c to $7.66; Infratil collected 19.5% or 2.27% to $8.78; Ebos Group improved 37c to $45.87; Summerset Group added 25c or 3% to $8.59; and Scales Corp rose 13c or 3.99% to $3.39.

PGG Wrightson was up 9c or 2.05% to $4.48; Goodman Property Trust increased 4.5c or 2.21% to $2.085; Rakon rebounded 2c or 2.41% to 85c; and Vista Group gained 5c or 3.6% to $1.44.

In the banking sector, ANZ was down 74c or 2.72% to $24.55; Westpac declined 64c or 2.72% to $22.86; and Heartland Group decreased 5c or 3.05% to $1.59 on the back of the Credit Suisse scare.

Ryman Healthcare declined 9c or 1.8% to $4.91; a2 Milk decreased 16c or 2.26% to $6.93; Sky TV shed 4c to $2.45; and T&G Global was down 10c or 4.52% to $2.11.

Other decliners were Vulcan Steel decreasing 24c or 2.81% to $8.31; Bremworth shedding 1.5c or 4% to 36; Allied Farmers falling 4c or 5.26% to 72c; and NZX down 3c or 2.46% to $1.19.

Tags: Market Close