NZ sharemarket falls nearly 1% on recession news

The New Zealand sharemarket tumbled nearly 1% on the revelation that the country was in a deeper recession than expected – and the NZ dollar hit a 15-year low.

Thursday, December 19th 2024, 6:40PM

by BusinessDesk

The S&P/NZX 50 Index was weak right from its opening and closed at 12,754.15, down 111.4 points or 0.87%.

There were 37.1 million share transactions worth $146.6m.

'Turned a corner'

NZ’s gross domestic product (GDP) fell 1% in the September quarter, and the June quarter was revised to a decrease of 1.1% – the worst six-month period since 1991 (excluding the covid slump). Analysts had expected a 0.4% fall in September.

The NZ dollar fell further against the American greenback, trading at US56.29 – its lowest level since 2009.

The ANZ Business Outlook survey showed confidence eased 3 points to plus 62 in December, while expected own activity increased 2 points to plus 50, and past own activity jumped 10 points to zero.

Pricing indicators and inflation expectations were little changed, but there was a surprising 7-point jump in cost expectations.

ANZ Research said the survey showed more signs of demand recovering, with the first decent lift in past activity, which is the best GDP indicator in the survey.

“At precisely zero, it’s certainly not strong in level terms, but it’s clear that the economy has turned a corner. Thank goodness, one would have to say, after the very weak third quarter GDP outturn,” ANZ said.

Greg Smith, head of retail with Devon Funds Management, said the latest GDP data showed the economy was in a tough place. It confirmed that the Reserve Bank was right to cut the official cash rate by 0.5% (last month), but “maybe it should have thought more seriously about a bigger reduction.

“The Reserve Bank was very aggressive in hiking interest rates, and the economy is paying the price. But it hasn’t been as quick in bringing them down. It takes time for rate cuts to feed through, and our economy is just not growing,” Smith said.

There was a sell-down on Wall Street after the US Federal Reserve cut its official rate by 25 basis points to 4.25-4.5% but said it would slow the pace of rate deductions to probably two next year instead of the expected four.

The Dow Jones Industrial Average plunged 2.58% or 1,123 points to 42,326.87 points for its 10th successful fall – the worst losing streak since 1974. The S&P 500 declined 2.95% to 5,872.16 points, and Nasdaq Composite fell 3.56% to 19,392.69.

Across the Tasman, the S&P/ASX 200 Index had fallen 1.84% to 8,156.8 points at 6pm NZ time.

Local stocks

Many of the blue-chip stocks were hit. Auckland International Airport was down 14.5c or 1.75% to $8.14; Chorus declined 18.5c or 2.05% to $8.82; Mercury Energy decreased 13c or 2.12% to $6; and Infratil shed 24c or 1.94% to $12.12.

Port of Tauranga declined 15c or 2.31% to $6.35; Spark was down 6c or 2.09% to $2.81; Turners Automotive decreased 14c or 2.55% to $5.35; Skellerup eased 16c or 3.13% to $4.95; and Fletcher Building shed 11c or 3.83% to $2.76.

A2 Milk was up 10c to $6.43; Seeka increased 14c or 4.59% to $3.19; T&G Global gained 7c or 4.86% to $1.51; Rakon improved 2c or 3.57% to 5c; Eroad added 4c or 4.17% to $1; and Radius Residential Care rose 2.7c or 14.36% to 21.5c.

Napier Port increased 10c or 4% to $2.60 after telling shareholders at the annual meeting that it is “back on track with a steady recovery in [cargo] volumes” following the impact of Cyclone Gabrielle.

The port company provided full-year operating earnings guidance of $55m-59m compared with $52m, a 39.5% increase, in the previous year.

Manuka honey producer Comvita was up 2c or 2.53% to 81c after confirming its bank syndicate has prepared a revised covenant package for the second quarter of the 2025 financial year.

Comvita’s share price is at a 15-year low. Comvita, in the middle of restructuring including cutting two regional chief executive roles, told the market it will have a half-year net loss of $6.5m-$7.5m compared with a loss of $3.2m in the previous corresponding period.

The company had been impacted by suppressed consumer spending and deep discounting by entry-level honey labels.

Winton Land, down 1c to $1.85, is delaying the Northbrook Wynyard Quarter project in Auckland for 12 months and instead is accelerating the Northbrook retirement villages in Arrowtown and Wanaka, which are due to open in May.

Winton will complete the current preparation work at Wynyard Quarter but said, “It’s a big project for us, and we want to get the timing in the cycle right.” Pre-sale buyers can stay in at the current prices or seek a refund of their deposit plus any interest.

Tags: Market Close