NZX 50 posts biggest weekly gain in four years on rate cut optimism

New Zealand’s benchmark stock index rose the most in a week since the post-covid rebound as investors embraced the prospect of lower interest rates, reviving a stagnant economy and boosting the allure of companies that pay reliable dividends.

Friday, August 16th 2024, 6:12PM

by BusinessDesk

The S&P/NZX 50 Index climbed 17.18 points, or 0.1%, to 12,727.75, taking its weekly gain to 4%. Across the main board, 97 stocks rose, 42 fell, and 40 were unchanged. Turnover was $104.7 million.

The benchmark index was already joining a global rally when it surged into life on Wednesday when the Reserve Bank of NZ (RBNZ) surprised some in the market by cutting the official cash rate a quarter-point to 5.25% and signalling more cuts to come as the economy faces a triple-dip recession and rising unemployment.

This week’s gain is the biggest since April 2020, when the market bounced sharply out of the covid slump.

“That’s a cracking week,” Mark Lister, investment director at Craigs Investment Partners, said. “We’re up 10% from recent lows over the last couple of months.”

Lister said NZ’s market was more sensitive to interest rate movements given the lack of tech and growth stocks and the dominance of real estate companies and utilities, which typically pay reliable dividends.

roperty stocks were mixed on Friday, having broadly rallied since the rate cut. Kiwi Property Group slipped 1.6% to 94 cents on a volume of 2.7m shares, while Precinct Properties NZ was unchanged at $1.30 with 2.6m shares changing hands, and Stride Property rose 0.7% to $1.41 on a volume of 1.9m.

Fletcher Building rose for a sixth day, up 0.3% at $3.47 on a volume of 1.4m and was up 11.9% this week.

Earnings season hits its stride next week, which Lister said would show how tough the recent economic conditions have been, though some optimism might creep into the outlook statements.

“We know things are ugly at the moment,” he said. “The share market is not the economy; it’s where we think the economy will be.”

Among companies reporting on Monday, Contact Energy rose 1.8% to $8.98 and Freightways fell 1.2% to $9.22.

Synlait Milk was the biggest gainer on the day, jumping 21.7% to 36.5 cents on a volume of 3.5m shares after settling a dispute over supply arrangements with The a2 Milk Co and ending a protracted arbitration.

As part of the deal, a2 agreed to participate in an upcoming equity raising, helping the milk processor shore up a shaky balance sheet. a2 shares 4.2% to $7.73 on a volume of 1m.

Fruit exporter Scales Corp led the benchmark index higher Friday, up 4.7% at $3.60 and taking its weekly gain to 7.5%, while retailer KMD Brands gained 3.3% to 47.5 cents and was up 18.8% this week.

My Food Bag gained 2.2% to 18.5 cents. At Friday’s annual meeting, it told shareholders that its customer base had stabilised and that it planned to pay interim and final dividends in the 2025 financial year.

Minnow tech company Vital jumped 14.3% to 32 cents when it resumed trading when directors rejected a due diligence request by suitor Empire Capital, which plans to mount a partial takeover at 37.5 cents a share.

Arvida Group, which is under a takeover offer at $1.70 a share, remained heavily traded with a volume of 4m shares and was unchanged at $1.64.

Tags: Market Close