Market close: Prospect of interest rate hike spooks NZ shares

Photo / NZME

The prospect of a rise in interest rates by the end of the year because of increasing inflation overhung the New Zealand sharemarket which fell nearly half a per cent.

The S&P/NZX 50 Index closed at 12,758.93, down 53.38 points or 0.42 per cent, after falling during the afternoon from a morning high of 12,824.17.

There were 63 gainers and 71 decliners over the whole market, with 48.48 million shares worth $165.99 million changing hands.

Jeremy Sullivan, investment adviser with Hamilton Hindon Greene, said the market had another soft day amidst investors' fear that interest rates will rise sooner than expected – it could be as early as November.

"That's bad for all and sundry, particularly the property and equity markets which will face headwinds," he said.

ASB chief economist Nick Tuffley said the inflation and demand gauges in the NZIER's latest Quarterly Survey of Business Opinion are so strong that it is increasingly clear the Reserve Bank cannot afford to wait much longer before starting to reduce the amount of monetary stimulus currently in place.

ASB and BNZ economists have moved their forecast for Official Cash Rate hikes from February to November this year. The Reserve Bank's current path points to rises beginning in the middle of next year.

Sullivan said the local market was also treading water awaiting the August updates when the listed companies report their latest financial results.

He said the most interest will be in a2 Milk, which has dragged the market down this year. "It has broken through the $7 mark, and everyone will be going straight to the end of the report to look at a2 Milk's outlook and whether they have their sales channels sorted.

"Brokers have a forecast price range of $5.50, $8.50 and $13 for a2 Milk – that shows there's a lot of uncertainty about the company," Sullivan said.

After a solid recovery from a May 19 low of $5.50, a2 Milk slipped 4c to $7.16, while Synlait was up 6c to $3.78.

Auckland International Airport lost ground, falling 24c or 3.15 per cent to $7.37 after a strong rise the day before following a takeover bid for Sydney Airport, which was also down 1 per cent to A$7.70 ($8.22) at 5.45pm NZ time. Air New Zealand was up 3c or 1.9 per cent to $1.61.

Mainfreight didn't stay long at the lofty peak of $80, falling $1.15 to $78.85. Fletcher Building came under profit-taking, falling 17c or 2.24 per cent to $7.41. Chorus was up 7c to $6.42.

Among the energy companies, Mercury rose 14c or 2.09 per cent to $6.85; Contact was up 2c to $8.22; Trustpower gained 19c or 2.38 per cent to $8.19; and Meridian was down 1c to $5.21.

Ryman Healthcare recovered 3c to $13.32, while fellow retirement village operator Summerset Group Holdings fell 20c to $13.29.

Pushpay Holdings, which has just lost its chief financial officer to Serko, was down 5c or 2.94 per cent to $1.65.

Westpac Banking Corporation has sold its New Zealand life insurance business to Fidelity Life Assurance Company for $400m, and Westpac's share price slipped 5c to $27.28. Westpac has an exclusive 15-year agreement with Fidelity for the distribution of insurance products to its New Zealand customers.

NZ Automotive Investments, which presented to the NZX Retail Investor series forum, rose 5c or 4.76 per cent to $1.10.

The New Zealand Refining Co was one of the day's biggest movers, rising 7c or 10.14 per cent to 76c, after detailing shareholders on its move to convert the Marsden Point oil refinery into a fuel import terminal.

Other gainers were Goodman Property Trust, up 6c or 2.5 per cent to $2.46; DGL Group increasing 6c or 3.77 per cent to $1.65; Enprise Group rising 25c or 7.69 per cent to $3.50; TIL Logistics gaining 6c or 4.96 per cent to $1.27; and My Food Bag picking up 2c to $1.34.