NZ sharemarket favours OCR cut, up 1.75%

The New Zealand sharemarket surged 1.75% after the Reserve Bank of NZ cut the official cash rate 50 basis points – with relieved property stocks enjoying a revival.

Wednesday, October 9th 2024, 6:27PM

by BusinessDesk

The S&P/NZX 50 Index had risen 0.8% before the Reserve Bank of NZ (RBNZ) announcement, and it doubled that to close at 12,776.13, up 220.14 points or 1.75%.

Trading was steady, with 32.26 million shares worth $111.56m changing hands.

Saying economic activity was subdued, partly due to restrictive monetary policy, the RBNZ reduced the official cash rate (OCR) from 5.25% to 4.75% - its lowest level since March last year.

Trading banks immediately cut their interest rates.

“Business investment and consumer spending have been weak, and employment conditions continue to soften. Low productivity growth is also constraining activity,” the Reserve Bank said.

Annual consumer price inflation was within the bank’s 1-3% target range and converging on the 2% midpoint. Inflation increased 0.4% for the June quarter for an annual rate of 3.3%.

Matt Goodson, managing director of Salt Funds Management, said the OCR reduction was largely, but not entirely, expected. “The stocks benefiting from lower interest rates have risen today."

He said the market was expecting another 50 basis points OCR cut in November, but this will depend on the latest consumer price index, which will be released next week.

Key labour market data is also out before the next monetary policy statement on Nov 27.

The NZ dollar weakened against the American greenback, trading at US60.82c and down from an intraday high of US61.47c. Against the Australian dollar, the Kiwi was down to A90.55c, from 90.99c.

Local market

The property sector on the NZX was up 2.62%. Goodman Trust rose 6c or 2.87% to $2.15; Precinct was up 6c or 3.2% to $1.29; and Kiwi collected 2c or 2.14% to 95.5c.

Property for Industry increased 9.5c or 4.37% to $2.27; Stride gained 2c to $1.40; Investore added 3c or 2.5% to $1.23; Argosy was up 1.5c to $1.10; and Vital Healthcare Trust increased 5c or 2.63% to $1.95.

Vital Healthcare told the market that Craig Mitchell, chief executive of its manager Northwest Healthcare Properties Real Estate Investment Trust, will retire in the middle of next year. He will remain a director of Vital Healthcare.

Goodson said the lower interest rates will make the property stocks’ dividend yields more attractive. Their own cost of debt will start falling, and cap rates will stabilise and then decline, lifting valuations.

Turners Automotive was up 10c or 2.16% to $4.74, with the pressure coming off its finance book, which is funded on floating rates.

Heartland Group gained 2c or 1.94% to $1.05, while ANZ was down 80c or 2.38% to $32.75, and Westpac declined 84c or 2.4% to $34.16.

Market leader Fisher and Paykel Healthcare increased 70c or 1.98% to $36.05; Freightways was up 31c or 3.28% to $9.75; Mainfreight rose $2.95 or 4.21% to $73; Spark collected 6c or 1.96% to $3.12; and Auckland International Airport added 9.5c to $7.455.

In a sea of green, Contact Energy was up 29c or 3.51% to $8.56; Infratil gained 23.5c or 1.95% to $12.275; a2 Milk picked up 16c or 2.33% to $7.02; Chorus increased 19c or 2.17% to $8.93; Summerset Group added 26c or 2.15% to $12.35; and Ryman Healthcare was up 21c or 4.53% to $4.85.

Vulcan Steel rose 54c or 6.28% to a six-month high of $9.14; AFT Pharmaceuticals was up 11c or 3.61% to $3.16; Channel Infrastructure gained 5c or 2.78% to $1.85; KMD Brands added 2c or 4% to 52c; and Air NZ was up 1c or 1.89% to 54c.

Winton Land gained a further 6c or 3.09% to $2; Vista Group increased 8c or 2.77% to $2.97; Oceania Healthcare was up 2c or 2.56% to 80c; Promisia Healthcare improved 1.5c or 5.26% to 30c; and Radius Residential Care added 2.1c or 12.73% to 18.6c.

Amongst the few decliners, Accordant Group fell 8c or 16.67% to 40c; Eroad shed 3c or 2.91% to $1; and NZX was down 3c or 2.22% to $1.32.

Cancer diagnostics company Pacific Edge, down 0.005c or 3.09% to 15.7c, reported slightly lower test numbers of 7,045 for the second quarter ending September compared with 7188 in the previous three months. Asia Pacific volumes were up 6.2% to 1363.

Half-year test volumes were down 22% to 14,233, from 18,240, with Pacific Edge “undertaking a reorganisation to reduce the size of the sales team and preserve cash to weather the Medicare uncertainty.”

Cooks Coffee, unchanged at 29.5c, reported a 26% rise in half-year sales to $33.8m, with the UK up 36% to $23.4m and Ireland increasing 6.7% to $10.4m. Cooks now has 83 Esquire stores, up from 75 at the start of April.

Tags: Market Close