Investors lift shares after a less hawkish Reserve Bank outlook

A surprised New Zealand sharemarket rallied nearly 1% after the Reserve Bank indicated it was done with raising interest rates.

Wednesday, May 24th 2023, 6:53PM

by BusinessDesk

The S&P/NZX 50 Index had fallen to 11,862.42 points and then jumped to an intraday high of 11,995.27 when the Reserve Bank announced an expected 25 basis points rise in the official cash rate (OCR) to 5.5%.

What wasn’t expected was the message that the bank still sees 5.5% as the peak for the OCR and it expects rate cuts from the third quarter next year.

The index closed at 11,971.83, up 27.63 points or 0.23% – a turnaround of about 0.9%. There were 77 gainers and 49 decliners on the main board, with 32.25 million shares worth $133.3m.

Wholesale interest rates fell and the NZ dollar weakened – from US62.50 cents before the bank announcement to US61.70c against the American greenback, and from A$94.60c to $93.50c against the Australian dollar.

Matt Goodson, managing director of Salt Funds Management, said the Reserve Bank was less hawkish than the market expected.

“There is some scepticism over whether the fiscal policy is contractionary and the Reserve Bank kept its head down on the budget expansionary pressures,” he said. "A key question now is how long does it take to get back to the upper inflation range of 3%."

Infratil neared the $10 mark, rising 18c or 1.87% to $9.81. Fletcher Building increased 13c or 2.68% to $4.98; Meridian Energy added 6c to $5.50; a2 Milk was up 7c to $5.73; and Vulcan Steel improved 16c or 2% to $8.17.

Kiwi Property gained 1.5c to 92.5c; Accordant Group rose 18c or 12% to $1.68; Green Cross Health was up 7c or 5.26% to $1.40; and Carbon Fund increased 4c or 2.34% to $1.75.

Retirement village operators Summerset Group was up 28c or 3.2% to $9.03, and Ryman Healthcare gained 4c to $5.99.

Oceania Healthcare, down 1c to 78c, reported a 7% increase in annual revenue to $247.17m, a 5% gain in operating earnings (Ebitda) to $80.01m, and a net profit of $15.44m, down 75%. It is paying a final dividend of 1.3c a share on June 21. Oceania told the market that realised gains from new sales and resales increased 5% to $59.4m and it delivered 233 units and care suites during the year.

Market leader Fisher and Paykel Healthcare was down 32c to $25.34; Contact Energy declined 5c to $7.95; Serko shed 11c or 3.49% to $3.04; Synlait Milk decreased 6c or 3.8% to $1.52; and Turners Automotive was down 9c or 2.37% to $3.70.

Transport technology firm Eroad rose 6c or 10.34% to 64c after reporting a 46% rise in revenue to $165.23m and a loss from continuing operations of $11.77m for the year ending March.

The revenue, with a 12-month contribution from Coretex, surpassed the guidance of $159m-$164m and Eroad is forecasting $175m-$180m for the 2024 financial year.

Napier Port, up 6c or 2.5% to $2.46, recorded a 22.8% rise in revenue to $62.25m and a 3.3% drop in net profit to $8.69m for the six months ending March compared with the previous corresponding period. It is paying an interim dividend of 1.7c a share on June 22.

Container volumes increased 5.7% to 119,000 TEUs (20-foot equivalent units) and revenue was up 14.5% to $34.5m. Bulk cargo increased by 7.5% to 20.6m, and the return of cruise ships brought further revenue of $1.5m.

Napier Port told the market that trading will be subdued in the second half because of the crop losses and damage to primary processing caused by Cyclone Gabrielle.

SkyCity Entertainment, which held an investor day, was down 4c to $2.28 after lowering its full-year operating earnings (Ebitda) guidance to $300m-$310m, from $305m-$320m. SkyCity said electronic gaming machines' performance was strong, table games were subdued, it is experiencing higher legal and compliance costs, and the Auckland car park concession agreement was not yet settled.

Rakon gained 2c or 1.94% to $1.05 after reporting a 5% increase in revenue to $180.33m and a 30% fall in net profit to $23.22m for the year ending March. It is paying a maiden dividend of 1.5c a share on August 8.

Operating earnings (Ebitda) were $42.2m compared with $54.4m in the previous year, and are forecast to fall to $26m-$34m in the 2024 financial year. Rakon has completed its manufacturing centre in India and is producing advanced frequency and timing products for the telecommunications, space and defence sectors.

AoFrio, up 0.002c or 2.22% to 9.2c, has revised its full-year revenue guidance to $80m-$90m, for a mid-point growth rate of 14% rather than the previous 30%. The margin on sales of motors has reduced.

Tags: Market Close