Market close: NZ shares fall sharply as Reserve Bank moves to reduce economic stimulus

Reserve Bank Governor Adrian Orr. Photo / NZME

The move by the Reserve Bank to reduce economic stimulus – in effect signalling sooner-than-expected interest rates rises - buffeted the New Zealand sharemarket which fell more than half a per cent.

The S&P/NZX 50 Index closed down 65.25 points or 0.51 per cent to 12,719.68, after falling sharply late afternoon from 12,763.20 points following the Reserve Bank announcement. The index hit an intraday low of 12,706.54 points.

There were 91 decliners and just 39 gainers over the whole market on solid volume of 51.03 million share transactions worth $206.79 million.

The Reserve Bank will stop additional purchases under the Large Scale Asset Purchase programme by July 23, though it kept the official cash rate (OCR) at 0.25 per cent. But ANZ economists expect the OCR to increase 25 basis points next month. Two banks, ASB and KiwiBank, have already lifted mortgage and deposit rates.

The NZ dollar rose from US69.37c to 70.13c at 5.45pm NZ time after reaching 70.24c during the day, hurting local exporters, as New Zealand's central bank moved sooner than others overseas in tightening monetary policy.

Mark Lister, head of private wealth research with Craigs Investment Partners, said the quantitative easing was "a bit of a coin flip" in the eyes of financial markets, and an OCR hike looms a certainty following the Reserve Bank's November meeting, if not in August.

"It is a significant development and will provide a headwind for the local sharemarket, as well as taking the heat out of the housing market. We have so many interest-rate sensitive stocks and higher dividend shares.

"But interest rates will be going up for the right reasons, partly because of the inflation risk and more importantly the economy is in good shape. You can't have your cake and eat it too," Lister said.

Some of those interest rate sensitive stocks were down. Spark fell 8c to $4.84; Contact Energy lost 21c or 2.5 per cent to $8.19; and property companies Precinct decreased 5c or 2.9 per cent to $1.675; Goodman Property Trust shed 3c to $2.405; Argosy slipped 2.5c to $1.67; Vital Healthcare declined 2.5c to $3.29; and Stride was down 2c to $2.53.

Wine exporter Delegat Group fell 55c or 3.63 per cent to $14.60, Fisher and Paykel Healthcare was down 21c to $30.29; and manuka honey exporter Comvita declined 8c or 2.36 per cent to $3.31. Turners Automotive Group slumped 16c or 3.74 per cent to $4.12.

Fonterra Shareholders' Fund declined 9c or 2.36 per cent to $3.73, while Synlait Milk increased 8c or 2.11 per cent to $3.88.

Other decliners were Freightways, decreasing 15c to $12.50; Fletcher Building shedding 7c to $7.21; Ryman Healthcare falling 13c to $13.05; Vista Group, down 7c or 3.04 per cent to $2.23; Napier Port falling 7c or 2.01 per cent to $3.42; and Z Energy declining 4c to $2.82.

The banks ANZ Banking Group fell 53c or 1.77 per cent to $29.39; Westpac Banking Corporation was down 44c to $26.82, and Heartland Group Holdings declined 4c or 1.95 per cent to $2.01.

AFT Pharmaceuticals has gained regulatory approval in Italy and Malta to sell its Maxigesic oral liquid for children. The Maxigesic products are now licensed in more than 100 countries. AFT's share price declined 5c to $4.50.

Tilt Renewables, down 1c to $8.06, is paying a fully-imputed special dividend of 6.5c a share on July 30 prior to the takeover by Powering Australian Renewables and Mercury NZ.

Online personal lender Harmoney Corp, which listed last November, surged 18c or 8.26 per cent to $2.36 after reporting a record month in June with $53m of new lending on the back of strong growth in Australia. Total originations for the second half of the 2021 financial year were $250m, up 144 per cent on the first half. Group receivables are $501m, yielding a net interest margin of 11 per cent.

Ebos Group rose 30c to $32.50; Chorus increased 7c to $6.32; Pushpay Holdings gained 3c or 1.71 per cent to $1.78; Serko recovered 17c or 2.38 per cent to $7.31; Seeka was up 7c to $5.05; Third Age Health Services increased 6c or 2.61 per cent to $2.36; and Rua Bioscience collected 1.5c or 3.61 per cent to 43c.

EROAD is buying telematics specialist Coretex, with offices in Auckland, Sydney and San Diego, for $157.7m and a further $306m payable in 2023, subject to performance milestones. EROAD is making a $64.4m placement and $16.1m share purchase plan, and its share price was unchanged at $6.15. EROAD also reported sales growth, selling 4152 contracted units in New Zealand, Australia and North America during the quarter ending June.