Interest rate turmoil challenging for shares

Aweary and uncertain New Zealand sharemarket closed the week with a small loss, led down by the interest rate-sensitive property and energy stocks.

In a choppy session, the S&P/NZX 50 Index finished down 21.45 points or 0.19 per cent at 11,103.79.

Still, the index was 0.36 per cent ahead for the week, though it is now down 15 per cent so far this year.

There were 65 gainers and 69 decliners on the main board and volume was again light with 26.12 million shares worth $97.44 million changing hands.

Shane Solly, portfolio manager with Harbour Asset Management, said the local market and others were tired after a wild week globally.

In the US, the Dow Jones Industrial Average, for instance, has swung between a gain of 2.8 per cent and a fall of 1.15 per cent in single trading days this week.

“It’s very challenging out there,” said Solly. “The fixed interest market is in turmoil and central banks are still coming out with hawkish narrative. We’ve had a clear direction from the Reserve Bank that they are not done with rate rises and will hit inflation down with a large sledgehammer.

“A US Federal Reserve open market committee member indicated, ‘if you are expecting interest rates cuts next year, you are dreaming’.”

Solly said investors were taking capital out of the New Zealand market. “Trading volumes are light and that’s the power of the school holidays taking people out of action.”

The real estate sector was down 1.24 per cent for the day, and utilities declined 1.44 per cent. But these falls were balanced out by increases of 1.62 per cent and 0.54 per cent in the all materials and industrial sectors.

Vital Healthcare Trust fell 11c or 4.28 per cent to $2.46; Precinct Properties declined 3c or 2.29 per cent to $1.26; Kiwi Property was down 2.5c or 2.66 per cent to 91.5c; Stride decreased 4c or 2.4 per cent to $1.63; Investore shed 3c or 1.94 per cent to $1.52; but Argosy recovered 5c or 4.2 per cent to $1.24.

Solly said the property stocks, like energy, have good long-term earnings but they are sensitive to the correction in interest rates.

Contact Energy was down 9c to $7.35;

Mercury fell 15c or 2.71 per cent to $5.39; Meridian shed 7c to $4.75; Vector decreased 7c to $4.27; and Infratil declined 8c to $8.43.

Fletcher Building rose 13c or 2.58 per cent to $5.17 after a broker suggested it was oversold; Mainfreight gained 30c to $67.70; and Air New Zealand was up 1c to 72c.