Market close: NZ shares stage strong rally as Reserve Bank lifts OCR

The New Zealand sharemarket staged a strong rally of more than half a per cent after the Reserve Bank raised the official cash rate for the second time in two months to combat rising inflation.

The S&P/NZX 50 Index climbed from 12,674.73 points after the bank governor Adrian Orr delivered the latest monetary policy statement and closed at 12,766.79, up 78.25 points or 0.62 per cent.

There were 75 gainers and 60 decliners over the whole market, with an improved 49.1 million shares worth $162.98 million changing hands.

Greg Smith, head of retail with Devon Funds Management, said the market had braced itself for a 50 basis points rise. "It may have been a split decision, but having half of that provided the market with a sense of relief given its weakness lately. It had already priced in a 25 basis points rise."

The Reserve Bank increased the cash rate from 0.5 per cent to 0.75 per cent after moving it from an historical low of 0.25 per cent on October 4 – pushing up interest rates, particularly on mortgages.

The NZ dollar fell sharply to US68.99c (at 5.45pm NZ time) against the American greenback after earlier trading at US69.58c. The kiwi has now fallen from a high of US74.58c in late February.

Smith said there has been a hangover in the market since the initial October 4 cash rate rise. "The Reserve Bank has been a lone wolf amongst central banks in raising rates, and the market has lost nearly 600 points in that time.

"The bank doesn't meet again till late February next year and there will be some respite for the market and it can head into the New Year with some positivity," he said.

The Reserve Bank did lift its forecast, with the cash rate now expected to reach 2 per cent by the end of next year, and 2.6 per cent by the end of 2024, with inflation peaking at 5.7 per cent in the first quarter of next year.

Market leader Fisher and Paykel Healthcare was up 69c or 2.19 per cent to $32.20 on the eve of reporting its latest financial result; Meridian Energy increased 19c or 4.15 per cent to $4.66; Mercury gained 13c or 2.23 per cent to $5.95 and Port of Tauranga rose 15c or 2.23 per cent to $6.89.

Auckland International Airport, now having more certainty when travel will open up, was up 10c to $8; Arvida rose 5c or 2.88 per cent to $1.99; Harmoney increased 8c or 4.17 per cent to $2; DGL Group gained 5c or 1.87 per cent to $2.73 and Allied Farmers collected 4c or 4.88 per cent to 86c.

Pushpay Holdings fell 6c or 4.23 per cent to $1.36; Ryman Healthcare was down another 28c or 2.24 per cent to $12.20; Summerset Group Holdings declined 20c to $13.30; Fletcher Building decreased 9c to $6.84; and Vista Group plunged 14c or 5.6 per cent to $2.3.

Among reopening stocks Tourism Holdings was down 9c or 3.08 per cent to $2.83, and SkyCity Entertainment declined 5c to $3.10.

New listing TradeWindow fell 24c or 12 per cent to $1.76 after two days of strong rises and some investors taking early profits. Ventia Services Group began trading for the first time, rising 50c or 28.25 per cent to $2.27.

Global marketer a2 Milk is now defending two legal proceedings after a second class action by Shine Lawyers was filed in the Victorian Supreme Court. The dairy nutrition company's share price gained 5c to $6.60.

Tower rose 5.5c or 8.53 per cent to 70c after reporting a strong 72 per cent increase in net profit to $19.3m on revenue of $428.2m, up 4 per cent, for the year ending September. Customers increased 5 per cent to 304,000 and Tower is paying a final dividend of 2.5c a share on February 2. The insurer is returning $30.4m to shareholders through a share buy-back, after holding $56.6m above its target solvency margin.

Serko went into a trading halt after telling the market it is raising $85m - $75m from a placement and $10m through a retail offer – at a floor price of $7.05. It last traded at $7.85. Serko reported a half-year net loss of $15.2m on revenue of $9.2m, an 81 per cent increase. Total travel booking volumes rose 157 per cent to 1.3m, including new business with Booking.com.

ArborGen Holdings, now concentrating its seedlings business in the United States and Brazil, reported a 59 per cent increase in revenue to US$4.6m ($6.64m) and a net loss of US$500,000 for the six months ending September. ArborGen is next week selling its New Zealand and Australia operations for $22.25m, and its share price edged ahead 0.005c or 1.92 per cent to 26.5c.