Sharemarket droops after budget revealed

The New Zealand sharemarket dipped when finance minister Grant Robertson announced more spending and borrowing than expected in his latest budget.

Thursday, May 18th 2023, 6:28PM

by BusinessDesk

The S&P/NZX 50 Index was trading strongly until the early afternoon budget presentation and then lost more than half its gains to close at 11,976.08, increasing 24.42 points or 0.2%.

The index earlier broke through the 12,000 points mark for the first time in six weeks with an intraday high of 12,039.26.

There were 74 gainers and 53 decliners on the main board with 45.39 million shares worth $198.77m changing hands. Trading was boosted by the exchange of 2.98 million Smartshares US 500 ETF units worth $35.87m, and 11.78 million Total World ETF units worth $34.81m.

Mark Lister, investment director with Craigs Investment Partners, said the budget was stimulatory. “There’s more spending, more borrowing and more debt issuance, and that means a bit more inflation.

“The budget is good news for some parts of the economy as it fuels more activity. But there may now be two more official cash rate rises from the Reserve Bank when the market was expecting only one more in the monetary policy statement next week.”

Lister said it was great news that the Treasury is no longer forecasting a recession because of the cyclone recovery – “but time will tell”.

Treasury is also predicting that inflation will fall to 3% by next September, gross domestic product will grow 3.2% this year and drop to 1% next year, and unemployment will peak at 5.3% late next year.

Lister said he liked the higher-than-expected infrastructure spend: “That’s a commitment to get infrastructure moving and investing for the future.”

US news

The NZX index rose earlier on the suggestion that a deal on the United States debt ceiling should be reached by the end of the week. The Dow Jones Industrial Average was up 1.24% to 33,420.77 points; the S&P Index increased 1.19% to 4158.77; and the Nasdaq Composite gained 1.28% to 12,5000.57 and is up 19.28% so far this year.

At home, the retirement village stocks continued to rebound. Summerset Group increased 26c or 3.1% to $8.66; Arvida Group was up 3c or 2.65% to $1.16; and Oceania Healthcare gained 2c or 2.67% to 77c. But Ryman Healthcare was down 4c to $5.60 on the eve of reporting its latest annual result.

Serko surged a further 23c or 7.74% to $3.20 and has now risen nearly 37% in two days since reporting a higher-than-expected annual result.

Hallenstein Glasson also rebounded, gaining 14c or 2.39% to $6. Mercury Energy was up 14c or 2.21% to $6.48; Auckland International Airport increased 10c to $8.89 on trade worth $22.28m; Eroad added 2c or 3.77% to 55c; and Scott Technology collected 10c or 3.5% to $2.96.

Synlait gained 6c or 4.17% to $1.50; a2 Milk improved 5c to $5.65; Bremworth increased 3c or 8.11% to 40c; PaySauce rose 3c or 11.54% to 29c; and AFT Pharmaceuticals was up 6c to $3.46.

KMD Brands gained 2c or 1.82% to $1.12 after updating the market with a 15.6% increase in group sales for the third quarter ending April. Kathmandu sales were up 11.3%, Rip Curl 7.9% and Oboz shoes 120.3%. For the nine-month period, group sales were up 27.7%.

Goodman Property Trust, up 3c to $2.21, reported annual revenue of $213.8m, up 13.8%, and a net loss of $135.4m, mainly due to a $237.7m reduction in the value of its $4.8 billion portfolio. Its net tangible assets per share is $2.45 compared with $2.60 in the previous year. Goodman has one million square metres of warehouse and logistics space, with occupancy of 99.5%.

Restaurant Brands fell 80c or 10.96% to $6.50 after telling shareholders at the annual meeting that sales for the first quarter grew 12% but input cost pressures were constraining margins, particularly over the first half of the financial year.

Other decliners were Chorus, down 15c to $8.27; Michael Hill, giving up 3c or 2.75% to $1.06; Steel & Tube, falling 3c or 2.75% to $1.06; Vulcan Steel, shedding 10c to $8; Scales Corp, decreasing 7c or 2.12c% to $3.23; and Napier Port, down 5c or 2.03% to $2.41.

WasteCo, down 0.001c to 7.2c, announced a conditional agreement to buy Invercargill-based Cleanways and Enviro South and Cromwell-based Wastech Services for $7.35m.

T&G Global, unchanged at $2, expects to report a gross loss of $28m-$34m for the 2023 financial year because of the Cyclone Gabrielle impact. The apple crop has been harvested with NZ supply volumes down 19% on last year.

Four orchards, representing 13% of T&G’s planted hectares in Hawke’s Bay, were severely impacted, while a further 22% had some damage and will reduce productive capacity for two to three years.

Tags: Market Close