NZ sharemarket lifts on budget cuts and US news

The government’s $4 billion cost-cutting move and a passive speech from the United States Federal Reserve governor underpinned a firmer tone on the New Zealand sharemarket.

Monday, August 28th 2023, 6:25PM

by BusinessDesk

The S&P/NZX 50 Index had a very steady afternoon and closed at 11,479.01, up 11.35 points or 0.10%.

There were 60 gainers and 70 decliners over the whole market on volumes of 38.35 million share transactions worth $112.67m. The trading was dominated by Smartshares NZ Cash Exchange Traded Fund, with 17.55m units worth $53.02m changing hands.

Over the weekend, US Federal Reserve governor Jerome Powell indicated there wouldn’t be any more interest rate rises soon, saying the economy is proving more resilient than expected.

At the Fed’s annual conference in Jackson Hole, Powell said the central bank would remain data dependent, with the full effect of rate hikes yet to work into the economy.

Back home, the government announced an additional $4b in public service savings, including consultant costs. This follows a $2b deficit in tax revenue.

Finance minister Grant Robertson said: “Since May, we have seen further deterioration in the global economy, particularly in China. This will continue to have a direct impact on the NZ economy, and it is important that the Government responds to meet our balanced and responsible fiscal goals.”

Jeremy Sullivan, investment advisor with Hamilton Hindin Greene, said the government spending cuts will help reduce inflation.

“The government was seen as adding to inflation with its expenditure programme, and the reduction will be welcomed by the market.

“On top of this, we had a measured speech from Jerome Powell, and offshore markets were positive,” Sullivan said.

The Dow Jones Industrial Average was up 0.73% to 34,346.9 points; S&P 500 gaining 0.67% to 4405.71; and Nasdaq Composite increasing 0.94% to 13,590.65 and rising 30% so far this year.

Quiet results day

In the only local financial result for the day, Restaurant Brands was down 1c to $4.55 after reporting a 9.4% increase in revenue, a record, to $640.2m and an 85.6% dive in net profit to $2.18m, from $15.3m, for the six months ending June. Full-year net profit is expected to be $12m-$16m, and operating earnings (Ebitda) were $78.3m, down $7.1m.

The fast-food operator opened 10 new stores during the six-month period but was impacted by inflation, particularly rising ingredients and wage costs. Restaurant Brands said it could not raise prices fully to offset the cost increases without impacting transaction volumes.

Cinema software management firm Vista Group declined 13c or 7.6% to $1.58 and has fallen nearly 17% in two trading days since announcing a half-year net loss of $8.5m.

Fletcher Building was up 4c to $4.92; Fonterra Shareholders’ Fund increased 8c or 2.55% to $3.22; and a2 Milk improved 7c to $5.11, regaining a lot of the fall from its latest result.

In the energy sector, Meridian increased 6c to $5.35; Mercury added 8c to $6.35; Contact was up 6c to $8.30; and Genesis was down 4.5c or 1.83% to $2.41.

Third Age Health Services rose 10c or 6.99% to $1.53; MHM Automation was up 3c or 3.09% to $1; and Move Logistics gained 2c or 2.63% to 78c.

IkeGPS increased 4c or 5.88% to 72c after signing an extension contract with an American infrastructure customer worth at least $1.5m. This customer is utilising the IKE software platform to speed the engineering assessment of ultimately more than one million distribution network pole assets.

Infratil, up 4c to $10.07, has opened a seven-and-a-half-year, $50m infrastructure bond offer, with the ability to accept oversubscriptions up to $25m. Resident holders can also exchange some of their maturing 2023 bonds for the 2031 bonds.

Mainfreight was down 50c to $65.50; Summerset Group slipped 11c to $9.86; Gentrack declined 9c or 2.05% to $4.31; Briscoe Group decreased 6c to $4.60; PGG Wrightson shed 7c to $4; and Smartpay Holdings fell 5c or 3.13% to $1.55.

Delegat Group declined 11c to $8.36 after reporting a stable full year in line with market expectations. Delegat talked of recovering demand in its core UK and Ireland markets.

Other decliners were Seeka falling 14c or 5.3% to $2.50; Scott Technology down 10c or 2.99% to $3.25; NZME decreasing 2c or 2.13% to 92c; Carbon Fund shedding 4c or 2.19% to $1.79; and Blackpearl Group down 4c or 7.14% to 52c.

ANZ Bank, down 20c to $26.60, has filed an application with the Australian Competition Tribunal to review the Australian Competition and Consumer Commission’s decision not to approve the purchase of Suncorp Bank. Steel & Tube was down 4c or 3.28% to $1.18.

The steel processor and distributor earlier reported steady revenue of $589.1m, operating earnings (Ebitda) of $51.9m, and net profit of $17m, down 43.7%.

Volumes were down 12.4%, but pricing “remains elevated.” Steel & Tube has no bank debt and is paying a final dividend of 4c a share on Sept 22.

Tags: Market Close