Reserve Bank’s OCR call gives NZ stocks a boost - Market close

The Reserve Bank’s decision to keep its official cash rate on hold, while also signalling a slightly lower interest rate track, gave New Zealand stocks a boost at the end of what has been a disappointing reporting season.

The S&P/NZX50 index ended at 11,763.32, up 68.71 points or 0.59 per cent.

There were 96 gainers and 42 decliners on volume of 43.5 million shares, worth $135.6 million.

The Reserve Bank kept the official cash rate (OCR) at 5.5 per cent, as expected, but the bank softened its stance slightly, with new forecasts suggesting the rate may have peaked.

The bank said core inflation and most measures of inflation expectations have declined, and the risks to the inflation outlook have become more balanced.

“However, headline inflation remains above the 1 to 3 per cent target band, limiting the (Monetary Policy) Committee’s ability to tolerate upside inflation surprises.”

Jeremy Sullivan, investment adviser at Hamilton Hindin Greene, said the market had received a welcome boost from the central bank’s announcement, and also took some confidence from lower-than-expected Australian inflation data, which showed a CPI gain of 3.4 per cent in the January year.

The New Zealand dollar and local interest rates fell on the back of the Reserve Bank’s release.

“While they are still saying higher for longer, there is now only a very remote chance of further rate hikes in New Zealand, and the likelihood of interest rate falls has increased modestly,” Sullivan said.

Recently downtrodden stocks Fletcher Building and Ryman Healthcare rebounded, gaining 10c to $4.05 and 15c to $4.60 respectively, which helped drive the top 50 share index higher.

The big mover on the day was cinema software company Vista, which gained 13c or 8.5 per cent to $1.65 after reporting its annual result.

Vista said it had been transforming Vista Group into a single business, Vista Cloud.

“With box office for 2023 up more than 30 per cent on 2022, the confidence in the long-term success of the industry is one of the key factors driving the uptake of Vista Cloud, with recent signings looking to Vista Group to help accelerate their business performance with the best solutions in the industry,” the company said.

Vista was hit hard by the Covid-19 pandemic, when cinema showings in most countries stopped altogether.

“They are making good progress but the industry overall is coming off a low base,” Sullivan said.

Debt-laden Synlait won a small reprieve, gaining 5c to 74c. The dairy processor earlier advised the market it was creating a smaller executive leadership team “to increase alignment, reduce costs and accelerate growth”.

Among utilities, Spark and Meridian reported positive first-half results and both appeared to have brighter outlooks for the rest of the year.

Spark’s adjusted net profit fell 4.8 per cent to $157m for the first half but adjusted earnings before interest, tax, depreciation, amortisation and investment income (ebitdai) was up and the telco reaffirmed its full-year earnings and dividend guidance.

Meridian - the country’s biggest power generator - said its operating earnings, or earnings before interest, tax, depreciation, amortisation and financial instruments (ebitdaf), came to $443m, up $18m or 4 per cent over the half.

Spark shares gained 5c to finish at $5.13 while Meridan dropped 7c to $5.72.

Rural services group PGG Wrightson had another down day after issuing a savage earnings and dividend downgrade earlier in the week, the stock losing 27c or 9.3 per cent to finish at $2.63.

Sullivan said investors appeared to be losing confidence in the company as it faces tougher times ahead.

Kiwifruit packhouse company Seeka gained 12c to $2.80, despite reporting an annual loss of $14.5m for the December year.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.