NZX50 dips this week as rates start to bite

New Zealand’s S&P/NZX 50 index was marginally lower this week as the Reserve Bank’s signal that it’s done cutting interest rates coincided with rising bond yields around the world as other central banks start leaning towards hiking rates.

Gentrack led the market lower in a week when the utilities software company gave back some of its recent gains, and ahead of the announcement that it will be dropped from the S&P/NZX 20 index later this month, with Genesis Energy its replacement.

Fletcher Building posted the biggest gain on the NZX50 on Friday as the building materials firm’s refinancing cleared US private placement notes from its balance sheet, in a week when the company has been buoyed by consent and construction activity data.

And after local trading closed on Friday, the Ministry of Business, Innovation and Employment said it’s investigating Financial Markets Authority chair Craig Stobo, who has temporarily stood down while the probe is underway.

Expect the unexpected

The NZX50 declined 31.63 points, or 0.2%, to 13,483.99, sneaking into the red on a weekly basis with the benchmark down 0.04%. Within the index, 30 stocks declined on Friday, 17 gained and three were unchanged.

Turnover across the main board was $155.1 million, of which Auckland International Airport accounted for $35.8 million as it rose 1.9% to $8.06.

New Zealand’s market struggled for direction this week after the Reserve Bank’s quarter-point cut to the official cash rate taking it to 2.25% last week came with a warning that the central bank doesn’t expect to lower it further.

That disappointed investors who were anticipating a greater chance of another reduction, and coincides with similarly dwindling expectations for interest rates to go lower across the Tasman.

At the same time, the Bank of Japan will likely hike interest rates to stamp out burgeoning signs of inflation in the world’s fourth-biggest economy, which has seen yields on 10-year Japanese government bonds hit 18-year highs. The kiwi fell to 89.42 yen at 5pm in Auckland from 89.61 yen yesterday.

The Federal Reserve is one of the few major central banks still seen on track to cut rates, with a policy review due next week. The kiwi dollar traded at 57.64 US cents at 5pm from 57.68 cents yesterday.

“Expectations are that the Fed will cut and markets will be disappointed if it doesn’t receive one,” said Peter McIntyre, an investment adviser at Craigs Investment Partners. “We’ve seen an uptick in our swap rates as well, where we’ve seen movements in the five-to-seven-year space.”

Friday softness

Markets were generally soft across Asia, with Australia’s S&P/ASX 200 index marginally lower in late trading on Friday, while Japan’s Nikkei 225 index fell 1.5% and China’s Shanghai Composite edged up 0.1%.

Gentrack led the NZX50 lower on Friday, falling 5.9% to $9.40 and taking its weekly slide to 13%. While that was its steepest weekly fall since September 2021, that also followed a 37% surge the prior week as investors regained confidence the utilities software developer will win new customers and deliver on its long-term growth.

After trading closed, S&P Dow Jones Indices said Gentrack will leave the NZX20 index before trading opens on Dec 22, replaced by Genesis Energy, which declined 0.8% to $2.36.

Stride Property Group fell 2.5% to $1.375 on Friday, while Turners Automotive Group declined 2.4% to $7.70.

The agedcare sector was mixed for a second day after the government’s plans to tweak law governing retirement villages’ relationships with their residents. Oceana Healthcare rose 1.2% to 88 cents on an unusually large volume of 1.1 million, while Summerset Group Holdings dipped 0.8% to $12.15 and Ryman Healthcare fell 1% to $2.87.

Fletcher Building posted the biggest gain on the day, up 3.1% at $3.64 after the building materials firm exited its outstanding US private placement notes as part of a wider refinancing to set up a $200 million two-year facility and extending a $325 million syndicated facility to four years.

The company gained 8.7% this week, which included upbeat construction activity and new consenting data from Statistics New Zealand.

Among other gainers on the day, Investore Property rose 2.5% to $1.22 and Scales Corp rose 2.2% to $6.18.

Outside the benchmark index, minnow miner New Talisman Gold Mines sank 33%, or 1.3 cents, to 2.7 cents when the firm’s shares resumed trading, after saying it’s in talks with shareholder Terra Firma Mining as it plans to raise $550,000 of short-term funding ahead of a wider capital raising in February.

And after trading closed, the Ministry of Business, Innovation and Employment said it’s investigating Financial Markets Authority chair Craig Stobo, without providing any details of the probe. Stobo is standing down temporarily as FMA chair and other government roles while the investigation takes place.

Reporting by Paul McBeth.