NZ sharemarket up 0.4% despite inflation report - Market close

The Consumers Price Index for the September quarter was led by power prices up 11% and local authority rates up 8.8%, creating the highest inflation rate since 3.3% in the June quarter last year. Photo / 123RF

The New Zealand sharemarket quickly recovered from the bogey of rising inflation and made a comfortable 0.5% gain to start the new trading week.

The S&P/NZX 50 Index fell to a Monday morning low of 13,246.23 points when Stats NZ announced an inflation rate of 3% for the year ending September, up from 2.7% in the 12 months to the June quarter.

But with economists expecting the inflation increase to be temporary, the index rebounded in the afternoon and closed at 13,344.96, up 55.75 points or 0.42%.

There were 77 gainers and 64 decliners on the main board with 35.4 million shares worth $129.5m changing hands.

‘High-frequency data and inflation expectations’

The Consumers Price Index (CPI) for the September quarter was led by power prices up 11% and local authority rates up 8.8%, creating the highest inflation rate since 3.3% in the June quarter last year.

ASB said the CPI has hit the top of the Reserve Bank of NZ’s (RBNZ) target again, an unhelpful milestone that has nonetheless been long expected and still hasn’t stopped the bank from cutting the official cash rate 75 basis points so far in the second half of this year.

ANZ said the CPI data certainly doesn’t present any challenge to the bank’s August forecast of underlying inflation slowing.

“We continue to expect a 25bp cut in (late) November. Clearly, the high-frequency data and inflation expectations are a must-watch between now and the November monetary policy statement.”

Matt Goodson, managing director of Salt Funds Management, said there was no strong market reaction, either way, to the inflation outcome.

There was a fear that it could have been worse, and the good thing was that the inflation pressure was sporadic, namely energy prices and council rates, and was not broad-based.

“We hope to see some lower numbers in the December quarter and onwards,” he said.

Local stocks

Utilities investor Infratil was down 6c to $12.37 after telling the market it was buying Tauranga Energy Consumer Trust’s 4.92% shareholding in Contact for $437.7m or $8.95 a share – made up of $218.8m in cash and $17.6m or $218.8m worth of new Infratil shares, priced at $12.43 a share.

Infratil’s stake in Contact, which was up 10c to $9.15, will increase from 9.4% to 14.32% following Contact’s merger with Manawa Energy, in which Infratil had a 51% shareholding.

For that transaction, Infratil sold its Manawa stake for $186m and the 9.4% shareholding in Contact.

Goodson said Infratil’s purchase of the consumer trust’s stake removed the perception of an overhang of Contact shares from the market. But the move does provide questions for investors.

“There’s one view that Infratil’s holding at 14.3% is purely passive. But that’s a little bit unlikely as Infratil doesn’t have a portfolio of passive shareholdings.

“Another view is that they may consider further steps down the track, considering there’s a lot of investment potential in the electricity sector,” he said.

Elsewhere in the energy sector, Mercury increased 16c or 2.47% to $6.65.

Eroad, which is shifting its growth plans from the challenging North American market to Australasia, fell a further 8c or 4.26% to $1.80 after slumping $1 or 34.7% on Friday after making a number of announcements, among them being the departure of co-chief executive David Kenneson (“to spend time with family and pursue the next chapter in his career” according to an NZX filing) and revenue and free cash flow downgrades. The firm expects to take an impairment of up to $150 million on its US business.

Briscoe Group was down 16c or 3.08% to $5.04; Vista Group eased 8c or 2.91% to $2.67; Third Age Health declined 24c or 5.16% to $4.41; Colonial Motor decreased 20c or 2.53% to $7.70; and Blackpearl was down 4.5c or 3.88% to $1.115.Fisher and Paykel Healthcare was up 25c to $35.70; Freightways collected 11c to $13.26; Gentrack gained 33c or 3.63% to $9.43; Scott Technology increased 22c or 8.66% to $2.76; Ryman Healthcare added 6c or 2.19% to $2.80; and TradeWindow was up 2.5c or 7.04% to 38c.

Investore was down 4.56c or 3.56% to $1.22 after shareholders voted in favour of buying the 7ha Silverdale Retail Centre from its parent company, Stride Property, for $114m at an initial yield of 6.8%. Stride, declining 5c or 3.4% to $1.42, will continue to manage the centre.

The fully leased, open-air centre just north of Auckland city has an annual net income of $7.8m and provides Investore with 32 new tenants in its portfolio, including Chemist Warehouse, Noel Leeming and Macpac. The centre has a total of 39 tenants.

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