Optimism lifts the NZ sharemarket

A more optimistic New Zealand sharemarket burst through the 12,000 points mark for the first time in three months, and Synlait Milk chimed in with a 23% rise after receiving crucial shareholder loan backing.

Thursday, July 11th 2024, 6:34PM

by BusinessDesk

The S&P/NZX 50 Index traded solidly in the afternoon and closed at 12,058.29, up 114.96 points or 0.96% after hitting a morning low of 11,917.91.

The index earlier pushed through 12,000 on March 25 and stayed above that level for eight trading days – it was 12,012.24 points on April 5 – before heading south.

There were 98 gainers and 40 decliners over the whole market on volumes of 42.45 million share transactions worth $116.43m.

Paul Robertshawe, chief investment officer with Octagon Asset Management, said the market had a more positive tone and this was clearly a flow-through from the unexpected pivot by the Reserve Bank.

“Historically the bank wanted to see very low inflation and is now saying it will respond to more current data such as insolvencies, overdue financing and car sales rather than waiting for the three-month lag of unemployment and consumer price index.”

Robertshawe said the market had priced in two official cash rate reductions by November to around 5% and another by February.

“The August company reporting season is going to be bad and instead the market is focussing on the change in tune from the Reserve Bank and relief is on its way.”

On Wall Street, the S&P 500 and Nasdaq Composite indices pushed to new heights. The Nasdaq rose 1.18% to 18,647.45 points and S&P 500 broke through 5600 for the first time after increasing 1.02% to 5633.91 – its 37th record close.

The Dow Jones Industrial Average was up 1.09% to 39,721.36 points as the market became more confident that inflation is being beaten and interest rate cuts are on their way.

The June US consumer price index is expected to show annual inflation has fallen to 3.1%, down from 3.3% in May.

On the local market

At home, Synlait rose 6c or 23.08% to 32c after major shareholder a2 Milk lent its support to the successful special meeting vote to approve the $130m loan from Bright Dairy to repay bank debt. The vote was 99.59% in favour.

George Adams, Synlait chair, said the shareholder loan resolution completed the first step in resetting the company’s balance sheet – “the core advanced nutrition and foodservice businesses have enormous growth potential”.

Synlait will now arrange a capital raise “to reduce debt to a sustainable level” and this includes repaying $180m retail bonds in December.

A2 Milk, up 11c to $7.63, told the market before the meeting that it still has concerns about Synlait’s broader recapitalisation plan and it will continue to have discussions in the coming weeks.

Robertshawe said the a2 Milk support meant it didn’t want Synlait to go into receivership but “but until they get through the capital raise Synlait will continue to be constrained”.

Ryman Healthcare increased 21c or 5.77% to $3.85 on a broker upgrade. Forsyth Barr said Ryman was in a unique position, having a once-in-a-decade opportunity to reset both its business model and perception of the company in the minds of investors.

Forsyth Barr, setting a target share price of $7, said if Ryman gets it right, the rewards for investors could be substantial. Fellow retirement village operators Summerset was up 35c or 3.65% to $9.95 and Arvida gained 3c or 3.26% to 95c.

Mainfreight continued its good run, rising $2.87 or 4.03% to $74 despite going ex-dividend of 87c a share. NZME climbed 9c or 9.18% to $1.07, having risen from 81c on May 17.

Fisher and Paykel Healthcare was up 31c to $31.56; Spark gained 10.5c or 2.57% to $4.195; Fletcher Building increased 10c or 3.39% to $3.05; Freightways rose 27c or 3.45% to $8.10; Ebos added 60c or 1.83% to $33.45; and Mercury Energy collected 16.5c or 2.46% to $6.885.

Ventia Services was up a further 10c or 2.22% to a new high of $4.61. Other gainers were Turners Automotive improving 9c or 2.24% to $4.10; Scott Technology up 9c or 3.81% to $2.44; Delegat Group adding 10c or 1.89% to $5.40; Steel & Tube increasing 5c or 5.95% to 89c; and Rua Bioscience up 0.007c or 10% to 7.7c.

Meridian Energy was down 11c to $6.49; AFT Pharmaceuticals declined 10c or 3.28% to $2.95; Scales Corp decreased 8c or 2.3% to $3.40; and Goodman Property Trust eased 5c or 2.4% to $2.03.

Restaurant Brands shed 6c or 2.21% to $2.65; T&G Global declined 6c or 3.41% to $1.70; My Food Bag was down 0.008c or 5.67% to 13.3c, and PGG Wrightson eased 7c or 3.08% to $2.20.

Tags: Market Close