Wary investors keep the NZ sharemarket flat

The New Zealand sharemarket finished the week with a very small gain, but investors are wary about the continuing rise in long-term bond yields.

Friday, August 4th 2023, 6:37PM

by BusinessDesk

The S&P/NZX 50 Index’s routine didn’t surprise, falling in the morning and recovering in the afternoon to close at 11,943.2, up 6.58 points or 0.06%.

The index reached an intraday low of 11,906.83 points and was flat for the week.

There were 69 gainers and 55 decliners over the whole market on volumes of 25.59 million share transactions worth $90.03m.

Shane Solly, portfolio manager with Harbour Asset Management, said: “We are seeing some pretty wary markets. There was some mixed company reporting in the United States overnight, the Chinese economic stimulus is more measured than expected, and bond yields keep going up.”

The US 10-year treasury note yield has risen from 3.95% to 4.176% this week and back to some of the highest levels in five years.

The NZ 10-year government bond yield went from 4.68% to 4.83% this week and near last year’s high of 4.88%. The rising bond yields provide a risk to the valuation and cashflow of the interest rate-sensitive stocks.

In the US, the two big stocks, Apple and Amazon, both beat market estimates with their second-quarter earnings.

Apple, the world’s largest company by market value, reported a 2.3% rise in net profit to US$19.9 billion (NZ$32.6b) and revenue of US$81.8b, down 1%. Paying subscribers for its digital services topped one billion users worldwide. Apple’s share price was down 0.73% to US$191.17.

Amazon sales reached US$134.4b, up 11%, and earnings were US$6.7b compared with a loss of US$2b in the previous corresponding period. Amazon’s share price was up 0.55% to US$128.91.

Back in NZ

At home, Genesis Energy, down 3c to $2.67, told the market that the Huntly Unit 5 combined cycle gas plant is expected to be back in service in late May, with circuit breaker components being manufactured overseas. The impact of the outage is estimated at $20m-$30m.

Solly said wholesale electricity prices spiked on the announcement of further delays in bringing Huntly online.

Mercury, which has plenty of hydro storage in the North Island, benefitted by gaining 3c to $6.50. Meridian was down 2c to $5.58, and Contact declined 3c to $8.33.

As expected, Fonterra cut its 2023/24 farmgate milk price forecast to a mid-point of $7 per kgMS, from $8, mainly because of ongoing reduced import demand for whole milk powder in China. Fonterra Shareholders’ Fund was up 2c to $3.64.

This followed the release of the ANZ World Commodity Price Index, which fell 2.6% in July and, in local currency terms, 3.8% as the NZ dollar strengthened by 1.2%.

Meat and fibre prices were down 5.1%, dairy 3.1% and aluminium also fell as global demand for these commodities weakened further. Horticulture prices were up 1.6%, and forestry 0.2%, but log prices are still 17% weaker than a year ago.

Ebos Group was up 13c to $37.59; Mainfreight increased 79c to $68.39; Briscoe Group added 12c or 2.56% to $4.80; Restaurant Brands collected 17c or 2.74% to $6.38; and Steel & Tube rose 5c or 4.1% to $1.27.

Retirement stocks were stronger, with Summerset Group up 21c or 2.1% to $10.231; Ryman Healthcare gaining 8c to $6.82; Arvida Group rising 4c or 3.23% to $1.28; and Oceania Healthcare adding 1c to 78c.

ANZ Group, up 32c to $27.27, has had its bid to buy Suncorp’s banking arm rejected by the Australian Competition and Consumer Commission. Both parties are now referring the decision to the Australian Competition Tribunal.

Fellow banking groups Westpac increased 60c or 2.56% to $24, and Heartland was up 4c or 2.27% to $1.80.

Fisher and Paykel Healthcare was down 25c to $24.26; Auckland International Airport shed 7c to $8.30; Chorus declined 7.5c to $8.405; and Delegat Group decreased 20c or 2.12% to $9.2.

AFT Pharmaceuticals declined 11c or 3.01% to $3.54 after confirming to shareholders at the annual meeting that the 2024 financial year operating profit is expected to be $22m-$24m, with growth in the Australasian markets.

AFT is also expecting $6m licensing income on the launch of Maxigesic Rapid pain relief in the United States, following Food and Drug Administration approval but depending on how it undertakes the commercialisation.

T&G Global was unchanged at $2.04 after reporting an 18.6% increase in revenue to $765.26m for the six months ending June. But the bottom line plunged to an operating loss of $11.62m from a profit of $15m for the same period last year because of Cyclone Gabrielle and subdued consumer demand in some global markets.

The apple business’s revenue increased 27% to $508m compared with $401m last year, and T&G Fresh recorded a 12% revenue gain to $208m, up from $185m.

Tags: Market Close