Sharemarket has a muted response to Reserve Bank move

The New Zealand sharemarket had a muted response to the hold on the official cash rate, while technology company Eroad rejected a takeover offer.

Wednesday, July 12th 2023, 6:22PM

by BusinessDesk

As widely expected, the Reserve Bank of NZ (RBNZ) left the cash rate unchanged at 5.5% – for the first time since late 2021 - but warned it would likely need to stay there for some time.

The S&P/NZX 50 Index stayed slow and steady on the announcement and closed at 11,908.27, down 1.53 points or 0.01%.

There were 78 gainers and 46 decliners on the main board, with 33.19 million shares worth $111.37m changing hands.

David McConnochie, investment adviser with Forsyth Barr, said there weren’t any surprises in the RBNZ announcement. “It provides more stability around what is happening with interest rates, and the market was pretty flat.”

The NZ dollar strengthened slightly, trading at US62.14c from US61.90c against the American greenback after the announcement.

The RBNZ said global economic growth remained weak, and inflation pressures were easing. Core inflation in NZ was expected to decline as capacity constraints eased.

While employment was above its maximum sustainable level, there were signs of labour market pressures dissipating and vacancies declining.

House prices were now around sustainable levels, consumer spending growth had eased, and residential construction activity had declined, the Reserve Bank said.

ANZ Research still expects the RBNZ to increase the cash rate by 25 basis points in November.

“For now, inflation indicators continue to fall obediently, and the Reserve Bank’s pause is highly credible.”

ASB said: “We don’t expect rate cuts until May next year, give or take.”

Takeover rejected

Transport software firm Eroad rose 7c or 5.38% to $1.37 after announcing that the unsolicited takeover offer from Volaris Group subsidiary Brillian APAC undervalued its business, and it will not be granting due diligence.

Brillian recently increased its stake in Eroad from 17.734% to 18.737 per after buying 1.17m shares on the market. Brillian offered to buy all of Eroad’s remaining shares at $1.30 a share.

McConnochie said shareholders will just have to wait and see if any better offer comes along.

KMD Brands was down 9c or 8.65% to 95c after telling the market it will pass $1 billion in group sales for the first time at the end of the latest financial year in July.

Total sales are expected to reach $1.1b and operating earnings (Ebitda) $105m-$110m with three weeks of trading remaining. But KMD said fourth-quarter trading has been challenging through softening consumer sentiment and Kathmandu experienced a slower start to its winter trading. Its main market Australia has had a warmer start to the winter.

Ebos Group was down 29c to $37.71; Mainfreight declined 48c to $71; Infratil decreased 9c to $9.86; Meridian Energy shed 5c to $5.50; and Manawa Energy was down 8c to $4.92.

Scales Corp fell 9c or 2.65% to $3.31; Sanford decreased 7c to $4.07; Vista Group was down 5c or 2.7% to $1.80; Tourism Holdings shed 5c to $3.53; and My Food Bag declined 1c or 4.35% to 22c.

Freightways rebounded strongly, rising 20c or 2.38% to $8.61; Chorus was up 17c or 2.09% to $8.30; Auckland International Airport added 9.5c to $8.33; Fletcher Building gained 6c to $5.41; and Mercury Energy increased 6c to $6.50.

Leading banks ANZ was up 41c to $25.87, and Westpac collected 40c to $23.10.

The retirement sector continued its recovery as the housing market steadied, with Summerset Group up 5c to $10.35 and Ryman Healthcare also gaining 5c to $6.85. Radius Residential Care increased 2.5c or 12.2% to 23c.

The RBNZ said house prices have stabilised in recent months, and the outlook for the market has become more balanced. Higher net migration is supporting demand for housing, but higher interest rates continue to exert downward pressure on housing demand.

Winton Land rose 9c or 4.48% to $2.10; Vulcan Steel was up 21c or 2.31% to $9.29; Task Group increased 2c or 3.77% to 55c; 2 Cheap Cars added another 4c or 8.33% to 52c; Rua Bioscience improved 1c or 6.37% to 16.7c; and Blackpearl Group was up 3c or 6.98% to 46c.

Me Today, unchanged at 0.007c, is considering halving its beekeeping operations to 2,000 hives after finishing up with a 500-tonne manuka honey inventory, sufficient to meet forecast demand. Me Today is looking at closing the Wairarapa branch and continuing a smaller beekeeping operation at Turangi.

Tags: Market Close