NZ market follows the US as investors wait for Fed’s decision

New Zealand's benchmark share index headed downward on Tuesday, following US market sentiment as investors wait for the US Federal Reserve meeting later this week.

Tuesday, September 19th 2023, 6:11PM

by BusinessDesk

The S&P/NZX 50 Index fell 52.5 points, or 0.5%, to 11,344.52. Turnover was $83 million. There were 45 gainers and 83 decliners on the main board.

The US Federal Reserve meets over the next two days, and while it’s expected to pause rate hikes, CMC Markets analyst Tina Teng said the central bank’s stance on further moves could be “critical” for market trends.

'Virtual certainty'

Devon Funds head of retail Greg Smith said that markets had priced in no changes in rates as a “virtual certainty” while officials expected to maintain “some optionality” in November.

“Inflation at large is still coming down but is also getting some upward points of pressure,” he said. “We've got some pretty key central bank meetings towards the back end of the week."

He told BusinessDesk that the most “pivotal” meeting would be that of the Fed, and market investors seem to have locked in no rate hike this week.

“The big question is, what happens in November?”

In NZ’s market, Synlait Milk was up 5 cents or 4.3% to $1.21 today.

Following A2 Milk's announcement of cancelling its exclusive supply agreement, Synlait Milk's shares plummeted almost 10% on Monday, hitting a record low after a trading halt was lifted on Monday afternoon.

Synlait is disputing a2 Milk's authority to terminate the exclusivity deal.

BusinessDesk reported that A2 Milk's decision to terminate its exclusive deal with Synlait may revolve around revitalising the financial performance of Mataura Valley Milk (MVM), in which A2 Milk holds a 75% stake, partnering with China Animal Husbandry Group (25%).

A2 Milk purchased this Southland dairy company in 2021 for $268.5m to enhance supply diversification. However, in the financial year ending June 30, MVM reported earnings before interest, taxes, depreciation and amortisation loss of $26.5m, compared to the previous year's $18.8m deficit.

A2 Milk fell 10 cents or 2.1% cents to $4.73, as did Fonterra Shareholders’ Fund Units, which were down 7 cents or 2.1% to $3.23 by the end of day trading.

Mercury and Warehouse

Gentailer Mercury held its annual meeting today and confirmed the expansion of its Ngā Tamariki geothermal station to the market, which is expected to cost $220m.

The company cautioned that the required investment for the next generation could potentially lead to a short to medium-term increase in electricity costs.

This will be the fifth generating unit at Mercury’s Ngā Tamariki geothermal station. The stock was up 12.5 cents or 2% to $6.28.

“This investment is the first wave of the $1 billion we expect to commit this financial year to generation development we will construct over the next 3 years. It’s another important step in our ambitious programme to bring more renewables online for Aotearoa New Zealand,” chief executive Vince Hawksworth said.

Meridian Energy edged down 4 cents or 0.7% to $5.34, Manawa Energy was up 2 cents or 0.5% to $4.42, Genesis Energy rose 1 cent or 0.4% to $2.52, and Contact Energy was down 3 cents or 0.4% to $8.20.

The Warehouse told the market it intends to transition over 260 locations nationwide to renewable energy through a partnership with Lodestone Energy – commencing in 2026.

The retailer said it has committed to a long-term arrangement to source electricity from Lodestone Energy's solar farms to energise their Red and Blue retail and stationery outlets, Noel Leeming and Torpedo7 stores, distribution hubs, and administrative offices by the end of 2026.

The Warehouse rose 2 cents or 1.2% to $1.67.

KMD and Sky

KMD Brands, which reports its audited results for the 12 months ended 31 July 2023 on Wednesday, was up 3 cents or 3.8% to 82 cents.

“There'll be a lot of interest in if they’ve been able to maintain the top line,” Smith said.

“Price increases will have helped, but to what extent have margins eroded? They'll be the key points of focus – and the outlook? Some retailers have been more resilient than others.”

SkyCity Entertainment fell 7 cents or 3.6% to $1.90. The casino operator was in the high court in Auckland yesterday for a two-day scrap over a $220m contract it had with a Macquarie Group subsidiary.

Auckland hospitality operator Savor ended the day up 2.5 cents or 8.5% to 32 cents on light trading. It has its annual meeting on Wednesday.

Sky Network Television announced a new chief financial officer in the form of Ciara McGuigan, who will start at the company in March next year. McGuigan is currently the CFO at TVNZ, where she’s been for four years.

Chief executive Sophie Moloney told the NZX this morning that McGuigan had a strong media background and was a “highly regarded leader and finance professional”.

Sky TV shares were flat at $2.47 each by the end of Tuesday trading. Cinema tech company Vista International was up 1 cent or 0.7% to $1.45. Tech payment firm Task Group rose 3 cents or 6.9% to 46.5 cents.

The NZ dollar was trading at 59.16 US cents at 3pm in Wellington, up from 59.08 on Friday. The trade-weighted index was at 69.82, from 69.71 on Friday.

Tags: Market Close