Shares drift lower after OCR holds at 1%

Dividend stocks lose lustre without hoped-for rate cut

New Zealand shares fell after the Reserve Bank surprised investors by keeping the official cash rate at 1 per cent, meaning stocks held for reliable dividends didn’t become even more attractive from ever-lower interest rates.

The S&P/NZX50 Index decreased by 90.88 points, or 0.8 per cent, to 10,835.43. Within the index, 34 stocks fell, 12 rose, and four were unchanged.

Turnover was $175.9 million.

The RBNZ kept the OCR unchanged saying economic changes since its last review in August “do not warrant a change to the already stimulatory monetary setting at this time”. Investors were expecting a cut, which would have made stocks held for their yield more attractive.

“The market was 50-50 on whether it would cut — by holding rates we’ve seen swap rates tick up and the dividend-paying stocks in the market have drifted a bit on the basis that yields aren’t quite as attractive as they may have been had the rate had been cut,” says Hamilton Hindin Greene investment adviser Grant Davies.

Wholesale interest rate markets rose with the bid price on two-year swaps jumping up 21 basis points in the immediate aftermath. ANZ economists said they expected the New Zealand dollar to remain buoyed by the decision and for yields on swap rates to rise further in the meantime.

“Power companies and all the classic dividend stocks are all weakening with interest rates being slightly higher than anticipated,” Davies added. Meridian Energy led the index lower, falling 4 per cent to $4.53. Conversely, Mercury NZ gained 1 per cent to $5.03, and was the second most traded stock of the day with 3.3 million shares changing hands, while

Genesis Energy fell by 0.9 per cent to $3.22.

Shares of Contact Energy fell by 2.8 per cent to $6.95. The company held its annual meeting yesterday where chairman Rob McDonald told investors finding a way to keep the Tiwai Point aluminium smelter open was the best result for climate change.

Infratil fell by 3.5 per cent to $4.73 after the company reported a 1.7 per cent lift in first-half operating earnings. The utilities owner said a twomonth contribution from Vodafone New Zealand had offset weaker returns from Trustpower and its Longroad Energy interests in the US.

Mainfreight rose by 1 per cent to $40.50 after the logistics firm said its New Zealand operations will perk up as a growing pipeline of freight movements drive more business.

Kiwi Property Group was the volume leader yesterday with 3.9 million shares changing hands. The mall developer is in the midst of a capital raise. Its share price fell by 1.6 per cent to $1.54. Fletcher Building fell 0.2 per cent to $5.17 with 3.2 million shares trading hands.

Shares of a2 Milk declined by 0.2 per cent to $12.60 after it announced the resignation of its global chief marketing officer Susan Massasso. A search for her replacement is under way.

Supermarket property owner

Investore Property declined by 1.1 per cent to $1.85. Yesterday it said first-half profit had risen by 10 per cent. Stride Property fell 2.7 per cent to $2.18.