Market commentary
WELLINGTON: The New Zealand sharemarket was spooked by the Reserve Bank’s aggressive approach to increasing interest rates, leading to a possible recession — and heavyweight Fisher & Paykel Healthcare added to the woes with a soft annual result.
The S&P/NZX 50 Index dropped from its higher perch when the bank increased the official cash rate (OCR) 50 basis points to 2%, with more rises to come sooner rather than later.
The index closed 73.66 points or 0.65% down at 11,173.37 after reaching an intraday high of 11,316.06.
There were 53 gainers and 83 decliners over the whole market on volume of 49.77 million share transactions worth $172.74 million.
F&P Healthcare, the market’s largest stock on capitalisation, dominated the trading, with $38.7m worth of shares changing hands. F&P went under $20 for the first time in more than two years, falling 81c or 3.91% to $19.90 after reporting a fall in earnings.
‘‘We have a dynamic Reserve Bank which went early in the process of hiking interest rates to combat inflation, and it’s not done yet. The bank is accelerating the pace of the increases,’’ Harbour Asset Management portfolio manager Shane Solly said.
‘‘The bank’s tone was quite hawkish and as a result people are starting to consider the risk of a recession. We might offset inflation from offshore, but the aggressive approach might curtail consumer spending. Whether households can withstand the hikes in rates is in question.’’
The bank is expecting the OCR to reach at least 3.25% by the end of the year and hitting a peak of 3.9% by June next year, as opposed to its previous forecast of 3.4% by mid2024.
The NZ dollar strengthened considerably, increasing to US65c from an intraday low of 64.18c against the greenback.
F&P Healthcare reported a 28% fall in net profit to $376.9m on revenue of $1.68 billion, down 15%, for the year ending March. It is paying a final dividend of 22.5c a share on July 6.
Ryman Healthcare rose 26c or 2.63% to $10.14 after welcoming a new substantial shareholder, German fund ACATIS Investment KVG, which holds 6%. Summerset Group Holdings was down 22c or 2.06% to $10.45.
The quiet performer has been Chatham Rock Phosphate, rising 14c or 35% to 54c on 130 trades worth $93,946. Its share price started the year at 12.4c.
Property for Industry, up 7c or 2.93% to $2.46, is beginning a $60m onmarket share buyback because of its strong balance sheet. With — industrial properties and 133 tenants, its net tangible asset value is $3.034, a significant premium to the current share price.
Other gainers were Briscoe Group up 14c or 2.39% to $5.99; Hallenstein Glasson collecting 28c or 5.42% to $5.45; Synlait Group increasing 6c or 1.8% to $3.40; Vulcan Steel improving 12c to $9.99, Rakon up 11c or 7.24% to $1.63; and AFT Pharmaceuticals up 10c or 2.56% to $4.01.
Fletcher Building was down 15c or 2.67% to $5.47 as mortgage rates are set to rise further. Heartland Group Holdings declined 4c or 1.83% to $2.15. —