Market close: Energy stocks drag New Zealand shares down

Meridian Energy, the biggest local stock on market capitalisation, was down 17c or 3.31 per cent to $4.96. Photo / RNZ

A softer New Zealand sharemarket closed the week with a half per cent fall, dragged down by the big three energy stocks as long-term interest rates climbed back up.

The S&P/NZX 50 Index fell sharply at the opening and finished on 11,140.4, down 57.25 points or 0.51 per cent. The index was slightly ahead for the week thanks to the 1.3 per cent surge on Monday and has now fallen less than 3 per cent so far this year.

There were 46 gainers and 74 decliners over the whole market on very light trading of 22.42 million shares worth $49.38m.

Shane Solly, portfolio manager with Harbour Asset Management, said the market took two steps forward and then one step back today.

“We had [US Federal Reserve chair] Jerome Powell warning that more work may be needed to bring down inflation, and the NZ Purchasing Managers’ Index was pretty weak, suggesting a downside risk with the slowing economy. And we rip into the reporting season next week. It added up to a soft ending for the week,” Solly said.

In the US, the S&P 500 ended an eight-day winning streak, falling 0.81 per cent to 4347.35 points; the Nasdaq Composite was down 0.94 per cent to 13,521.45; and Dow Jones Industrial Average declined 0.65 per cent to 33,891.94.

The US 10 Year Treasury Note yield increased 12 basis points to 4.634 per cent after Powell spoke to the International Monetary Fund, and the NZ 10 Year Government bond climbed 11.5 basis points to 5.132 per cent, affecting the interest rate-sensitive stocks.

Meridian Energy, the biggest local stock on market capitalisation, was down 17c or 3.31 per cent to $4.96; Mercury declined 11c or 1.84 per cent to $5.88; and Contact shed 21c or 2.62 per cent to $7.82. Manawa, however, was up 9c or 2.02 per cent to $4.55.

Contact told the market the commissioning of the Tauhara geothermal power station near Taupō has been delayed because of several issues including under-performing steam-field valves and liquid handling systems.

Some elements of the steam separation plant need further design and modification and the power station is now expected to begin operating in the third quarter of next year at 152MW before moving to the capacity of 174MW. Construction of Tauhara began in early 2021 and is Contact’s sixth geothermal plant in the Taupō area.

Solly said it wasn’t a good day for Contact to provide a disappointing update when bond yields went up again.

Ebos Group declined 31c to $37.20; Freightways was down 20c or 2.5 per cent to $7.80; and Investore decreased 4c or 3.42 per cent to $1.13.

Napier Port, which reports its latest earnings next week along with Manawa and Investore, was down 3c to $2.22; Restaurant Brands declined 8c or 2.23 per cent to $3.51; Rakon shed 2c or 2.74 per cent to 71c; and Westpac Bank decreased 49c or 2.13 per cent to $22.52.

Mainfreight recovered a further 34c to $63.15 as analysts upgraded earnings forecasts. Oceania Healthcare was up 2c or 2.86 per cent to 72c; PGG Wrightson gained 6c or 1.8 per cent to $3.40; and Serko added 5c to $4.41.

KMD Brands, down 2c or 2.3 per cent to 85c, told shareholders at the annual meeting that progress towards working capital being 18 per cent of group sales was expected to drive strong cash flow in the second half. KMD said first-half results were dependent on the key Black Friday (mid-December) and Christmas trading periods.

Colonial Motor Company, unchanged at $8.92, told shareholders at the annual meeting it was experiencing a mixed trading environment and it would be a real challenge to meet the results of the past two years.

TradeWindow, unchanged at 23c, has had a waiver on a breach in lending covenant extended to the end of June next year. ASB Bank is working with TradeWindow to restructure $1.1m debt while the deal with London-based technology company nChain is completed.