Rocket Lab's shares have taken off.
The twin positives of lower interest rates and better-than-expected inflation data seem to have bypassed the sharemarket.
Official data this week showed inflation fell to 2.2% year-on-year, slightly below consensus forecasts of 2.3%, thereby reinforcing market expectations that the Reserve Bank will cut its official cash rate by another 50 basis points on November 27.
The data also added weight to the view that the central bank might cut the OCR by 75 basis points next month.
But on the day of the CPI release, the S&P/NZX50 index dropped by nearly 200 points, or 1.5%, mostly likely due to a decline on Wall Street on the same day.
Salt Funds managing director Matt Goodson said the sharemarket may have priced in aggressive rate cuts already.
“Certainly the anecdotal evidence suggests that the economy is dismal, but there appears to be something of a pickup in business confidence off the bottom,” he said.
“Even though inflation pressures are off their highs, they are still there to some extent.
“We have been through a cycle where the Reserve Bank hopelessly over-eased, then they over-tightened.
“Now it’s a question of where they get to in this current easing cycle.”
In terms of the equity market, conditions are still tough but the market is forward-looking and it is willing to forgive this year’s earnings and to look ahead to where those earnings might be in 2025 and 2026.
Goodson expects investors to focus now on the cyclical stocks, such as Turners and Freightways, for signs of life next year.
“Despite very tough current trading conditions, this should continue to see domestic cyclical stocks outperform as investors look through to the other side of the abyss and stronger earnings outlooks in the 2025 year.”
Rocket Lab’s Nasdaq-listed shares jumped 12.6% to US$11.19 ($18.88) on Thursday - marking the first time since January 2022 when the Kiwi-American firm has flown above its August 2021 listing price of US$10 ($16.43).
After long being stuck in orbit around US$5 ($8.22), the stock has blasted off, more than doubling over the past two months.
Factional ownership platform Sharesies said Rocket Lab was its most-traded US stock on Thursday.
More than 20,000 Sharesies members have Sir Peter Beck’s firm in their portfolio - but some have been cashing in this week rather than strapping in for the ride to Mars.
”We’ve seen more customers buying than selling, but in terms of value there’s been a much larger volume sold, as investors are potentially locking in gains with the increased prices,” a Sharesies spokeswoman said.
The immediate catalyst for Thursday’s bump was the company announcing its “fastest turn around to date” with an October 19 launch slated for the “Changes In Latitudes, Changes In Attitudes” mission - less than two months after a contract with a “confidential commercial customer”.
It will be Rocket Lab’s 12th launch of the year, doubling its 2023 total.
It’s long been founder and CEO Sir Peter Beck’s goal to increase the frequency launches of the firm’s Electron rocket from Launch Complex 1 in Mahia and Launch Complex 2 within Nasa’s Wallops Island facility in Virginia - with ocean retrieval of boosters at both locations.
Analysts or investors trying to read the tea leaves could do worse than check out an October 15 report by US broadcaster CBS’s local station in Virginia, which detailed concerns some residents had about Rocket Lab boosters being barged back to shore to a Queen Sound ramp.
The residents were told that there could be up to 24 off-loadings a year by 2028 - implying a launch a fortnight from Launch Complex 2 (although they were also reassured that a dedicated dock at Wallops Island should be built by then).
More broadly, investors have been cheered by Rocket Lab’s order book swelling to more than US$1 billion ($1.64b) worth of launches.
Nasa has awarded the firm a second Mars contract - the first was for two satellites to orbit the Red Planet, the second to study retrieving rocks from the Martian surface and ferrying them to Earth.
The contract is confirmation that Rocket Lab is on track for the first launch of its much larger Neutron rocket in mid-2025.
The Neutron will self-land in the manner of SpaceX’s Starship, meaning no docking to shore.
Sir Peter owns 10.5% of the firm, after selling down from 11.3% in September last year to capitalise his charitable foundation. The transaction netted him US$20.23m ($33.24m).
The recent surge, which has taken Rocket Lab’s market cap to US$5.56 billion ($9.14b), means his stake is now worth about US$584m ($949m).
The firm reports its third-quarter results November 12.
Concerns about Spark’s future dividend payments have weighed heavily on the stock.
The telco traded at $5.32 in January and is now back at around $3 - a level not seen since 2015.
But there could be more at play here other than dividends.
Speculation is building that Spark may fall out of the influential MSCI large cap index and be replaced by Infratil.
If that happens, it’s likely to take place in late November.
“It’s starting to look more likely than not that Infratil will replace Spark at this stage,” Goodson said.
Australian private equity firm Potentia’s attempt at a boardroom coup at Vista Group is not going well.
Admetus Capital Limited (Potentia) had sought to remove two existing directors and to appoint an executive of Potentia, Amitesh Chand, and the current chair of MYOB, Peter James.
But on Monday, Vista advised that James had notified the board that he did not wish to proceed with Potentia’s nomination, and had withdrawn his consent.
Then on Tuesday, Fisher Funds, the second biggest shareholder with 14.4% put its weight behind the cinema software firm’s current board.
Harbour Asset Management, which owns about 5%, also backs the current line-up.
Vista received a letter from Potentia on October 1 requesting that the board call a special meeting of shareholders to effect its planned board room reshuffle.
The board then undertook a process to evaluate Potentia’s proposed director appointments “in a manner that was intended to be fair to Potentia and in the best interests of all of Vista Group’s shareholders”.
That process included the board meeting with the New Zealand Shareholders Association, with Vista Group’s largest institutional shareholders and Vista Group’s founder shareholders, together representing more than 50% of the total ordinary shares on issue, to seek feedback on the proposal.
“The feedback to the board was that there was no shareholder support for Potentia’s proposal, and this was communicated to Potentia.”
At the same time, the board invited Potentia to propose independent director candidates for inclusion in Vista Group’s established Board succession process.
In May, Potentia paid $92.2 million ($2.10 a share), for a near 20% stake in Vista.
The stock last traded at just over $3.12, having gained 134% over the last 12 months.
The a2 Milk Class Action is now being jointly managed by Shine Lawyers and Slater and Gordon.
The firms represent Australian and New Zealand shareholders who suffered losses after acquiring a2 Milk shares on the ASX or the NZX following a 62% drop in market value in 2021.
In an update, the firms said mediation is scheduled to take place by December 2025.
However, if the matter does not settle, it will proceed to trial commencing in June 2026.
A2 Milk had recently completed discovery and produced approximately 37,000 documents.
“We are carefully reviewing and analysing those documents to prepare the necessary evidence in accordance with the Court’s orders,” the firms said.
The Financial Markets Authority (FMA) says most KiwiSaver providers are well-placed to manage their exposure to the commercial real estate market.
The FMA said in a report that commercial real estate had become an important alternative asset class for fund managers and was previously seen as a relatively low-risk investment option within a diversified portfolio.
Last year commercial real estate started to show signs of stress globally – increased interest rates and changes in usage patterns driven by the Covd-19 pandemic, especially around second-tier office buildings and retail investments, were driving down valuations.
By the start of 2024, transaction volumes had decreased, causing some overseas real estate funds to limit or suspend redemptions.
In this context, the FMA undertook research to increase its understanding of the exposure of New Zealand KiwiSaver providers to commercial real estate to better understand the risks faced.
The FMA engaged with 10 fund managers about their commercial real estate investments, including both default and non-default funds and funds of different sizes.
Based on the information that fund managers provided, most have good practices in place to identify and manage the risks across their commercial real estate positions.
“What we found in this research was largely reassuring – most New Zealand fund managers have been taking a pretty conservative approach to this sector – in many cases they’re underweight against their own targets,” FMA chief economist Stuart Johnson said.
- Additional reporting Chris Keall
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
Investors are waiting for next week's pivotal interest rate decision.