NZ sharemarket dips in wake of govt announcements

The New Zealand sharemarket had a late fall, unable to be inspired by the half-year economic update and mini-budget that lacked Christmas cheer.

Wednesday, December 20th 2023, 6:30PM

by BusinessDesk

The S&P/NZX 50 Index seemed to be heading towards its third flat day in four till the matching session and closed at 11,579.8, down 37.57 points or 0.32%.

There were 80 gainers and 45 decliners over the whole market on volumes of 326.34 million share transactions worth $95.09m.

Greg Smith, head of retail at Devon Funds Management, said there weren't a lot of surprises in the mini-budget. “Austerity is back in fashion as the new government looks to trim the fat.”

The coalition government outlined $7.5 billion in cuts and savings over the next four years, as well as committing to annual public service cuts of $1.5b, amounting to $6b in the four-year period.

In its half-year economic and fiscal update, the Treasury forecast average gross domestic product growth of 1.5% over the next two years, compared with 3.3% in the year to June.

A surplus is still expected in 2026-27 but at a much lower $240m than the $2.07b forecast in September. Inflation is predicted to be 4.1% by June next year before falling towards 2%, and unemployment is forecast to increase to 4.5% and peak at 5.2% in June 2025.

ANZ Research said there is little wiggle room in the outlook when it comes to the overdue fiscal consolidation, and it’s likely hard choices will need to be made to deliver tax relief and get the books back in balance by 2026-27.

“But faced with the trade-off between delaying the forecast return to surplus and deeper spending cuts, we think the new government is likely to preserve the surplus, unless a big shock comes along. All up, we’re not a lot wiser after today’s release,” the bank said.

“The increase in bond issuance was a couple of yards more than expected, reflecting changes to economic and financial conditions, as opposed to policy choices.” The bond issuance has been lifted by $7b overall, with the bank expecting a $5b increase to June 2027.

Bad day for retailers

On the market, KMD Brands declined 3c or 3.9% to 74c after reporting that group sales fell 12.5% for the first four months of the 2024 financial year because of “ongoing weakness in consumer sentiment”.

Kathmandu sales were down 21.6%, Rip Curl surf wear 5.7% and Oboz footwear 18.2%. Group operating earnings (ebitda) were $16m below the same period last year, but gross margin had improved.

Smith said retailers were entering a crucial period and relying on a strong end to the year. “Consumers are fragile and reining in their spending. Card spending is expected to show a 4% decline year-on-year, and there just might be a retail grinch.”

In other retail stocks, the Briscoe Group declined 14c or 3.01% to $4.51, and The Warehouse was down 6c or 3.59% to $1.61. Shopping centre owner Kiwi Property shed 1.5c or 1.72% to 85.5c.

Fisher and Paykel Healthcare was down 34c to $23.76; Mercury Energy shed 19c or 2.88% to $6.41; Auckland International Airport gave up 10c to $8.50; Napier Port decreased 6c or 2.44% to $2.40; Gentrack fell 19c or 2.79% to $5.62; and Sky TV declined 6c or 2.2% to $2.67.

Tags: Market Close