NZ sharemarket steadies after govt opens the books

The New Zealand sharemarket steadied the ship after the Treasury’s pre-election economic update turned out to be not quite as gloomy as people expected.

Tuesday, September 12th 2023, 6:30PM

by BusinessDesk

The S&P/NZX 50 Index was on a rollercoaster ride and reached an intraday low of 11,266.83 points before the announcement of the Prefu (pre-election economic and fiscal update).

The index bounced back and ended its `thrilling’ ride at 11,298.7, down just 3.7 points or 0.03%. Still, it was the eighth successive fall by the index.

There were 64 gainers and 60 decliners over the whole market on light volumes of 22.53 million share transactions worth $72.67m.

'Poor reading'

Jeremy Sullivan, investment advisor with Hamilton Hindin Greene, said the Prefu was largely as expected. But the Treasury provided a stimulatory outlook, and the deficit was not as bad as first thought.

“It still made for poor reading. The increase in government borrowing means the period before the official cash starts falling has been extended – from the middle of next year to the third quarter. It means higher interest rates for longer,” Sullivan said.

Treasury is forecasting the economy will grow 2.6% on average over the next four years. By 2027, the economy will be $4 billion larger than Treasury’s previous set of forecasts from May, and gross domestic product per capita will be roughly the same.

Annual wage growth is forecast to average 4.8% over the next four years compared to inflation of just over 2%, meaning working New Zealanders will be better off in real terms.

This year's deficit is now expected to be $10b, up from the $6.9b forecast in the latest budget. Next year’s deficit is expected to be $11.4b, up from the $7.6b forecast.

Over the June 2024-27 forecast period, the government bond issuance is expected to increase to $129b from $120b in the last budget.

ANZ Research said Treasury downgraded the fiscal outlook largely as expected, but the economic outlook has had a small upgrade, which is a surprise.

The pre-election update forecasts leave the door open to more downgrades to the books further down the track. It’s likely that risks will materialise before the books are back in surplus. The current forecast return to surplus (2026-27) has a ‘best-case scenario’ look about it.

ANZ said the surplus would end seven consecutive years in deficit following covid and Cyclone Gabrielle – one more year in deficit than followed the global financial crisis and Canterbury earthquakes.

Winners and losers

On the market, Skellerup Holdings had a strong bounce, rising 20c or 4.44% to $4.70; Fisher and Paykel Healthcare was up 31c to $21.55; Ebos Group recovered 39c to $35.20; Mercury Energy collected 6c to $6.22; a2 Milk gained 8c or 1.781% to $4.77; and Fonterra Shareholders’ Fund increased 5c to $3.32.

Pacific Edge was up another 0.008c or 8.16% to 10.6c; Gentrack added 12c or 2.83% to $4.36; Turners Automotive improved 7c or 2% to $3.,57; NZME gained 3c or 3.26% to 95c; and Move Logistics increased 3c or 4.48% to 70c.

Among retailers, Michael Hill was up 2c or 2.11% to 97c, and The Warehouse was down 4c or 2.31% to $1.69.

In the property sector, Stride declined 3c or 2.27% to $1.29, and Precinct was down 2c or 1.73% to $1.135.

Contact Energy gave up all the gain from the day before, falling 30c or 3.57% to $8.10; Manawa Energy declined 8c or 1.81% to $4.33; Vulcan Steel shed 37c or 3.89% to $9.13; Seeka decreased 5c or 2.17% to $2.25; and Eroad was down 5c or 6.25% to 75c.

Other decliners were Infratil, down 8c to $10.22; Comvita, shedding 7c or 2.17% to $3.16; Rakon decreasing 2c or 2.67% to 73c; ikeGPS down 2c or 2.9% to 67c; and Serko down 7c or 1.79% to $3.85.

Air NZ, down 0.005c to 75c, told the market that its schedule may be impacted from January because of a reduction in Pratt & Whitney jet engine availability.

Pratt & Whitney disclosed a condition affecting the maintenance plan for the global Geared Turbo-Fan jet engine fleet, and 600 to 700 engines will be impacted over the next three years. A revised maintenance will be completed within two months.

Currently, Air NZ has 16 A320/321NEO aircraft in its fleet of 106 aircraft, servicing Australia and the Pacific Island markets and, to a much lesser extent, domestic New Zealand.

Sullivan said with 16 of Air NZ’s aircraft out for a period, there could be significant disruption. “The maintenance programme can create logistical issues. It’s not like changing oil; it’s complicated and expensive, and you have to wait your turn.”

Used car dealer 2 Cheap Cars was up 3c or 4.92% to 64c. The NZ Shareholders’ Association is backing a proposed deal for David Sena to buy 30% of the shares in 2 Cheap Cars from Eugene Williams, taking his holding to about 76%.

Tags: Market Close