New Zealand shares dropped ahead of an expected interest rate hike this week by the US Federal Reserve, which may help drive up local borrowing costs. Precinct Properties and Tegel Group fell while Briscoe Group gained after reporting record annual earnings.
The S&P/NZX50 Index dropped 17.7 points, or 0.2 per cent, to 7,177.09. Within the index, 26 stocks dropped, 15 rose and nine were unchanged. Turnover was $148 million.
Global markets are expecting the US Federal Open Market Committee to lift the fed funds rate a quarter point to a range of 0.75 per cent to 1 per cent at their meeting, held on Thursday New Zealand time, with Fed officials having made a series of hawkish comments over the past few weeks. That would narrow the gap with the Reserve Bank's 1.75 per cent rate which the New Zealand bank has projected to remain on hold.
"We're funded predominately from offshore, our interest rate markets are really driven by what's happening in the US," said Peter McIntyre, investment adviser at Craigs Investment Partners. "We've had lower rates for an extended period of time but we're certainly starting to see the effects of swap rates rise.
The markets are 100 percent in that the Federal Reserve will increase the base cash rate - it's a question of how many times is that going to be lifted in the next twelve months. That will have an impact not only on our equities market but into mortgage rates as well."
Precinct Properties was the worst performer on the index, down 2.6 per cent to $1.14, while Tegel Group dropped 2.4 per cent to $1.24 and Air New Zealand declined 2.2 per cent to $2.28.
Kathmandu Holdings was the best performer, up 2.6 per cent to $1.96, while Meridian Energy rose 2.6 per cent to $2.78 and Xero gained 2 per cent to $18.98.
Outside the benchmark index, Briscoe Group rose 0.2 per cent to $4.40. The homeware and sporting goods chain lifted annual profit 26 per cent to deliver another record profit as it bolstered fatter margins with a gain on the sale of a Hastings property and dividends from Kathmandu Holdings.
Net profit rose to $59.4m, or 26.5 cents per share, in the 52 weeks ended January 29 from $47.1m, or 21.2 cents, a year earlier when its balance date included an extra week, the Auckland-based retailer said.
"It reported very well, it's an impressive set of retail figures that a number in the game would only dream of having," McIntyre said. "It's a pity the stock's not in the NZX 50, it's a quality operation. The free float is not significant and that in itself leads to issues - institutions don't like stocks which don't have a lot of liquidity, it's a wee bit unloved and institutions don't tend to hold it in any great quantity. Unless that gets resolved you will see Briscoe outside the NZX50, but it is a very well-managed business."
Energy Mad gained 4.2 per cent to 2.5 cents. The energy efficient light bulb maker and marketer is up for sale as the company's board weighs up the future of the business.
The Christchurch-based company sought a trading halt on its shares yesterday, and today said the board is "currently pursuing a potential sale of the business" among "various options for the future of the company". A sale would need shareholder approval, meaning it would have to convince NZX-owned fund manager SuperLife, which swapped 2.25 million convertible notes for shares last month lifting its stake to 71.4 per cent.
Airwork Holdings was unchanged at $5. A $5.40 per share partial takeover by Chinese group Zhejiang Rifa Holding Group has been declared unconditional and Rifa must now pay accepting shareholders within seven days. Rifa had received 94.7 per cent shareholder acceptances, meaning scaling will occur.