Market close: Reserve Bank's aggressive OCR move spooks investors

The S&P/NZX 50 Index dropped from its higher perch following the OCR hike. Photo / NZME

The New Zealand sharemarket was spooked by the Reserve Bank's aggressive approach to increasing interest rates, leading to a possible recession – and heavyweight Fisher and Paykel Healthcare added to the woes with a soft annual result.

The S&P/NZX 50 Index dropped from its higher perch when the bank increased the official cash rate (OCR) 50 basis points to 2 per cent, with more rises to come sooner rather than later.

The index closed 73.66 points or 0.65 per cent down at 11,173.37 after reaching an intraday high of 11,316.06.

There were 53 gainers and 83 decliners over the whole market on volume of 49.77 million share transactions worth $172.74 million.

Fisher and Paykel Healthcare, the market's largest stock on capitalisation, dominated the trading, with $38.7m worth of shares changing hands. Fisher and Paykel went under $20 for the first time in more than two years, falling 81c or 3.91 per cent to $19.90 after reporting a fall in earnings.

Shane Solly, portfolio manager with Harbour Asset Management, said "we have a dynamic Reserve Bank which went early in the process of hiking interest rates to combat inflation, and it's not done yet. The bank is accelerating the pace of the increases.

"The bank's tone was quite hawkish and as a result people are starting to consider the risk of a recession. We might offset inflation from offshore, but the aggressive approach might curtail consumer spending. Whether households can withstand the hikes in rates is in question," said Solly.

The bank is expecting the OCR to reach at least 3.25 per cent by the end of the year and hitting a peak of 3.9 per cent by June next year, as opposed to its previous forecast of 3.4 per cent by mid-2024.

The NZ dollar strengthened considerably, increasing to US65c from an intraday low of 64.18c against the American greenback.

Fisher and Paykel Healthcare reported a 28 per cent fall in net profit to $376.9m on revenue of $1.68 billion, down 15 per cent, for the year ending March. It is paying a final dividend of 22.5c a share on July 6.

Fisher and Paykel told the market it supplied $880m of hospital hardware, representing 10 years of sales prior to Covid-19. And operating revenue was 33 per cent above the pre-Covid 2020 financial year.

Solly said Fisher and Paykel's result was a little bit below expectation and the market was always wary. "The company is being very open about the lack of clarity in the near term and the restocking of consumer products – and this has marched the stock back."

Fisher and Paykel has fallen hard from its high of $37.68 set in late August 2020 and its share price has lost most of the Covid gains.

Ryman Healthcare rose 26c or 2.63 per cent to $10.14 after welcoming a new substantial shareholder, German fund ACATIS Investment KVG, which holds 6 per cent. Summerset Group Holdings was down 22c or 2.06 per cent to $10.45.

Pacific Edge gained 4c or 5.06 per cent to 83c as its sales team gets back on the ground in the United States market.

Pushpay Holdings was up 5c or 3.57 per cent to $1.45, and Solly said the (takeover) dance continues and "we'll see where the dance lands."

Online bookings provider Serko fell 35c or 8.54 per cent to a 21-month low of $3.75 following weakness in travel and tourism stocks offshore.

The quiet performer has been Chatham Rock Phosphate, rising 14c or 35 per cent to 54c on 130 trades worth $93,946. Its share price started the year at 12.4c.

Property for Industry, up 7c or 2.93 per cent to $2.46, is beginning a $60m on-market share buy-back because of its strong balance sheet. With 97 industrial properties and 133 tenants, its net tangible asset value is $3.034, a significant premium to the current share price. The buy-back of 25.17m shares will last about a year.

Fellow property companies Precinct Properties was down 3c or 2.17 per cent to $1.355; Kiwi Property declined 2c or 1.91 per cent to $1.02; Goodman Property Trust decreased 3.6c to $2.05; and Argosy shed 2.5c or 1.98 per cent to $1.24.

Other gainers were Briscoe Group up 14c or 2.39 per cent to $5.99; Hallenstein Glasson collecting 28c or 5.42 per cent to $5.45; Synlait Group increasing 6c or 1.8 per cent to $3.40; and Vulcan Steel improving 12c to $9.99.

Rakon rose 11c or 7.24 per cent to $1.63; Green Cross Health collected 4c or 3.17 per cent to $1.30; Gentrack was up 8c or 5.44 per cent to $1.55; and AFT Pharmaceuticals increased 10c or 2.56 per cent to $4.01.

Energy companies Mercury gained 8c to $5.80, and Vector was up 8c or 1.92 per cent to $4.25.

Fletcher Building was down 15c or 2.67 per cent to $5.47 as mortgage rates are set to rise further. Heartland Group Holdings declined 4c or 1.83 per cent to $2.15.