Market close: OCR call sours NZ sharemarket, dollar weakens

Reserve Bank Governor Adrian Orr. Photo / NZME

The New Zealand sharemarket took a turn for the worse after the Reserve Bank, as expected, raised the official cash rate (OCR) for the first time in seven years, and the NZ dollar weakened.

The market was trading merrily till the early-afternoon announcement, and the S&P/NZX 50 Index dropped suddenly, closing at 13,166.44 – down 33.55 points or 0.25 per cent after reaching an intraday high of 13,256.18.

There were 73 gainers and 63 decliners over the whole market on volume of 38 million share transactions worth $165.6 million.

The Reserve Bank increased the OCR by 25 basis points to 0.5 per cent, saying "the current Covid-19 restrictions have not materially changed the medium-term outlook for inflation and employment since the August Statement."

The move triggered an increase in mortgage rates, and economists expect further OCR hikes next month and in February and May, taking it to 1.5 per cent by the middle of next year.

The NZ dollar fell from an intraday high of US69.81c to US69.25c (at 6pm NZ time) against the American greenback.

Dan Stratful, investment adviser for Forsyth Barr, said the OCR move was well signalled and the market seems to be taking the rise in its stride.

"There has been a small sell-off as might have been expected, but interestingly the interest rate-sensitive stocks haven't been greatly affected. For instance, we haven't seen a knee-jerk reaction with the energy stocks, and property companies were pretty steady."

Stratful said the macro-economic picture was still jittery. "I expect volatility will continue through October, and a lot of investors will be looking to buy in the dips."

Amongst the energy stocks, Mercury increased 9.5c to $6.46; Meridian was up 4.5c to $4.95; Trustpower gained 1c to $7.30; Genesis was unchanged at $3.29, while Contact was down 2c to $8.23 and Vector declined 5c to $4.13.

The rebound by a2 Milk ended abruptly, falling 43c or 6.31 per cent to $6.38, after an Australian law firm filed a class action on behalf of investors in the Victorian Supreme Court. The claim alleges that a2 Milk engaged in misleading or deceptive conduct, and breached continuous disclosure rules by posting four consecutive downgrades from September 2020 to May 2021.

Fisher & Paykel Healthcare has launched a new compact full-face mask for the treatment of obstructive sleep apnea, and its share price was down 31c to $30.24.

Chorus, another interest rate-sensitive stock, tumbled 20c or 2.95 per cent to $6.58, but Spark was up 5c to $4.74.

Synlait Milk was down 7c or 1.89 per cent to $3.63; Napier Port declined 5c to $3.15; Briscoe Group decreased 9c to $6.63; Scales Corporation shed 10c or 1.82 per cent to $5.40; Serko dropped 11c to $7.99; and Gentrack was down 4c or 2.29 per cent to $1.71.

Established companies Ebos Group increased 8c to $35.10; Freightways rose 12c to $12.65; and Skellerup gained 19c or 3.18 per cent to reach a new high of $6.17. Seeka was up 8c to $5.18, and Delegat Wine picked up 13c to $14.63.

Electronic components manufacture Rakon continued its strong run, rising 6c or 4.23 per cent to $1.48, after sitting at 95c on August 27.

Mainfreight gained 90c to $94.90; Infratil was up 7c to $8.40; Vista Group increased 4c to $2.64; Foley Wines rose 6c or 3.82 per cent to $1.63; Bremworth picked up 2c or 2.7 per cent to 76c; and NZME was up 2c or 1.98 per cent to $1.03.

Interest will turn to Z Energy and whether Australian fuel supplier Ampol will make a formal takeover offer by the end of the week. That's when Ampol's due diligence period ends, and Stratful said an offer would need to be around the $4 a share mark to gain the support of the Z Energy board.

Ampol had earlier indicated a $2 billion takeover bid at $3.78 a share. Z Energy's share price was down 1c to $3.40.

Asset Plus told the market it will now be selling its Eastgate Shopping Centre in Christchurch on April 1 next year, and its share price edged ahead 0.005c to 33.5c.

New Zealand Oil and Gas increased 2c or 4.35 per cent to 48c after buying into three gas producing projects held by Central Petroleum in the Northern Territory's Amadeus Basin. NZOG has a 25 per cent interest in the Mereenie oil and gas field, and 50 per cent in both the Palm Valley and Dingo gas fields.

Utilities software firm ikeGPS Group has again extended its contract with an American communication customers supporting fibre infrastructure deployment, and will generate $1m revenue over the next 12 months. Its share price slipped 1c to $1.01.