NZ sharemarket dives 1.5% despite positive inflation data

Inflation has reached its lowest level in 42 months but that wasn’t enough to stop the New Zealand sharemarket plunging more than 1.5% as several leading stocks took a dive.

Wednesday, October 16th 2024, 6:39PM

by BusinessDesk

Trading in the afternoon was volatile and the S&P/NZX 50 Index declined 199.45 points or 1.55% to 12,641.32 at the close. There were 47.5 million share transactions worth $156.14m.

Greg Smith, head of retail with Devon Funds Management, said the annual inflation rate of 2.2% didn’t surprise the market and there were investor concerns involving Spark, a2 Milk and Infratil.

Spark remained locked in a nine-year low after declining 9c or 2.97% to $2.94; a2 Milk was down 29c or 4.11% to $6.76; and Infratil shed 34.5c or 2.79% to $12.

Fisher and Paykel Healthcare was down 63c or 1.7% to $36.50; Mainfreight decreased $1.74 or 2.38% to $71.26; and Ebos Group shedding 99c or 2.68% to $35.91, added to the day’s decline.

Smith said a2 Milk has fallen three days in a row due to disappointment over the lack of details about China’s latest economic stimulus. China is a2 Milk’s main market.

“There is continuing concern about the sustainability of Spark’s dividend and rising speculation that the telco may be announcing a further earnings downgrade (at the annual meeting on Nov 1).

“Another concern is that one of Infratil’s investments, US-based Longroad Energy, may be impacted under a Trump presidency with the removal of tax breaks for renewable energy initiatives,” Smith said.

In NZ, the September consumers price index increased 0.6%, below forecasts of 0.8%, and the annual inflation of 2.2%, down from 3.3% in the June quarter, was within the Reserve Bank’s target band of 1-3% for the first time since March 2021.

Inflation peaked at 7.3% in the June 2022 quarter.

Stats NZ said prices are still rising but not as fast as previously recorded. Local authority rates and payments increased 12.2%, contributing over half of the 0.6% quarterly rise.

Smith said the Reserve Bank changed its mandate to price stability, and inflation has fallen faster than some people expected.

“Inflation is running through the bank’s target range at pace, and given the current recession, it could overshoot and go right to the bottom of the band (of 1%).

"We should be at or below the neutral rate of 3.8% right now, and the case for a 75-basis points reduction in the official cash rate seems plausible," Smith said.

Kiwifruit grower and packer Seeka surged 23c or 8.61% to $2.90 after upgrading its full-year gross profit guidance to $21m-$25m from $17m-$21m and declaring a dividend of 10c a share payable on Jan 20. Seeka said the new guidance range indicated record operational earnings.

Ryman Healthcare was down 16c or 3.21% to $4.83; The Warehouse shed 2c or 1.82% to $1.08; Sanford decreased 9c or 2.34% to $34.76; and Scott Technology eased 5c or 2.44% to $2.

In the property sector, Argosy declined 3c or 2.7% to $1.08; Goodman Trust was down 5.5c or 2.55% to $2.10; Investore decreased 4c or 3.28% to $1.18; and Precinct shed 2.5c or 1.95% to $1.26.

Contact Energy was down 19c or 2.2% to $8.46 after reporting that South Island controlled storage was 119% of mean and North Island 109%. Retail electricity and gas sales were 389GWh, up from 371GWh a year ago, while wholesale electricity sales were 814GWh, up from 689GWh.

Mercury, down 2c to $6.70, told the market it was forecasting hydro generation of 3900GWh for the financial year, an increase of 100GWh from the August guidance. KMD Brands, down 2c or 4.12% to 46.5c, announced that Rip Curl chief executive Brooke Farris has resigned after 14 years with the company.

KMD group chief executive Michael Daly will cover that role until a new appointment is made.

Other retailers Briscoe declined 13c or 2.61% to $4.85; Hallenstein Glasson was down 11c to $7.22; and Michael Hill eased 2c or 3.51% to 55c.

Smartpay fell 6c or 7.02% to 79.5c; Turners Automotive eased 10c or 2.17% to $4.50; Eroad declined 6c or 6% to 94c; Steel & Tube was down 4c or 4.12% to 93c; Santana Minerals decreased 9c or 3.75% to $2.31; and Fonterra Shareholders’ Fund shed 12c or 2.41% to $4.85.

Gentrack rose 34c or 3.24% to $10.84; Tower added 3.5c or 2.57% to $1.395; Scales Corp was up 6c to $3.81; Foley Wines collected 2c or 2.6% to 79c; and Rakon increased 5c or 7.58% to 71c.

Synlait Milk, up 0.005c to 41.5c, said $169m of the $180m bonds will be redeemed early on Nov 13. The remaining $11m held by bondholders can be traded until Dec 4 ahead of maturity on Dec 17.

Tags: Market Close