NZ shares sink after RBNZ keeps OCR at 1%

Meridian Energy led the index lower. Photo / File

New Zealand shares fell after the Reserve Bank surprised investors by keeping the official cash rate at 1 percent, meaning stocks held for reliable dividends didn't become even more attractive from ever-lower interest rates.

The S&P/NZX50 Index decreased by 90.88 points, or 0.8 per cent, to 10,835.43. Within the index, 34 stocks fell, 12 rose, and four were unchanged. Turnover was $175.9 million.

The RBNZ kept the OCR unchanged saying economic changes since its last review in August "do not warrant a change to the already stimulatory monetary setting at this time." Investors were expecting a cut, which would have made stocks held for their yield more attractive.

"The market was 50-50 on whether it would cut - by holding rates we've seen swap rates tick up and the dividend-paying stocks in the market have drifted a bit on the basis that yields aren't quite as attractive as they may have been had the rate had been cut," says Hamilton Hindin Greene investment adviser Grant Davies.

Wholesale interest rate markets rose with the bid price on two-year swaps jumping up 21 basis points in the immediate aftermath. ANZ economists said they expected the New Zealand dollar to remain buoyed by the decision and for yields on swap rates to rise further in the meantime.

"Power companies and all the classic dividend stocks are all weakening with interest rates being slightly higher than anticipated," Davies added.

Meridian Energy led the index lower, falling 4 per cent to $4.53 on a volume of 1.3 million shares. Conversely, Mercury NZ gained 1 per cent to $5.03, and was the second most traded stock of the day with 3.3 million shares changing hands, while Genesis Energy fell by 0.9 per cent to $3.22, as almost 290,000 shares traded hands.

Shares of Contact Energy fell by 2.8 per cent to $6.95 on a volume of 2.6 million shares. The company held its annual meeting today where chairman Rob McDonald told investors finding a way to keep the Tiwai Point aluminium smelter open was the best result for climate change.

Infratil fell by 3.5 per cent to $4.73 on a volume of 1.5 million shares after the company reported a 1.7 per cent lift in first-half operating earnings. The utilities owner said a two-month contribution from Vodafone New Zealand had offset weaker returns from Trustpower and its Longroad Energy interests in the US.

"It was broadly in line but I guess there was no reason to go out and buy it. They are being hit with their interest in Trustpower and exposure more broadly as they are a good dividend payer historically," Davies said.

Mainfreight rose by 1. per cent to $40.50 on a volume of about 150,000 shares, after the logistics firm said its New Zealand operations will perk up as a growing pipeline of freight movements drive more business. Net profit rose to $59.1m in the six months ended September 30 from $55.7m a year earlier, although new accounting standards dragged the bottom line down. Davies described the first half result as "solid."

"There was a bit of change in the accounting standards which muddies the waters slightly but I guess investors are giving them support for their performance over the last 20 years."

Kiwi Property Group was the volume leader today with 3.9 million shares changing hands. The mall developer is in the midst of a capital raise. Its share price fell by 1.6 per cent to $1.54. A dozen other companies traded more than a million shares today, the second most traded being Mercury, followed by Fletcher Building which fell 0.2 per cent to $5.17 with 3.2 million shares trading hands.

Shares of A2 Milk declined by 0.2 per cent to $12.60 with 660,000 shares trading hands after it announced the resignation of its global chief marketing officer Susan Massasso. A search for her replacement is underway.

Supermarket property owner Investore Property declined by 1.1 per cent to $1.85. Today it said first-half profit had risen by 10 per cent. The company said unrealised gains in the value of its "big box" retail properties were partly offset by performance fees paid to manager Stride Property. Stride fell 2.7 per cent to $2.18.