New Zealand has just had its largest quarterly fall in gross domestic product on record – fuelled by the Covid-19 lockdown – but that didn't faze a steady local sharemarket.
The S&P/NZX 50 Index drifted down 37.57 points or 0.32 per cent to 11,777.13, after reaching an intraday high of 11,873.30, above the previous day's close. Trading was strong with 64.56 million shares worth $278.93 million changing hands, and there were 77 gainers and 53 decliners over the whole market.
Economic activity shrank 12.2 per cent in the three months ending June, less than the Treasury forecast of 16 per cent. It officially confirmed that New Zealand was in recession but that's not expected to last with a bounce-back in activity in the next quarter ending September as more business opened up.
Matt Goodson, managing director of Salt Funds management, said the GDP figures were weak as expected, but they are very historic and the market is forward-looking. "It would take something shocking with GDP to move the market – they were extraordinary weak figures but the reasons are well understood."
New Zealand was behind Australia (down 7 per cent), United States, Japan and Canada in terms of a slump in quarterly economic activity, but ahead of Britain with a 20.4 per cent drop. China's activity grew 11.7 per cent.
ANZ economists said the next quarter bounce-back will not mark anything near a recovery from this Covid crisis. The economists expect it will take as long for activity to return to pre-crisis levels as it did following the global financial crunch, which took nine quarters to fully recover.
The local market leaders suffered falls as profit-taking continued after their sharp rises – Fisher and Paykel Healthcare was down 55c to $32.45 on trade worth $27.7m, and a2 Milk fell 29c to $17.88 on trade worth $12.4m.
Toasting solid rises were Ryman Healthcare , up 28c or 2.04 per cent to $14; wine company Delegat Group , gaining 38c or 2.6 per cent to $14.98; and Serko , increasing another 10c or 2.13 per cent to $4.80. Port of Tauranga was also up 7.4c to $7.38, but retailer Briscoe Group fell 12c or 2.87 per cent to $4.06.
Heartland Group Holdings reported a solid full-year result and its share price rose 7c or 5.88 per cent to $1.26, after starting this year at $1.87. The bank's net profit of $72m, down 2.2 per cent for the 12 months ending June, was ahead of analysts' prediction, and its revenue increased 13.2 per cent to $235.3m. It is paying a final dividend of 2.5c a share on October 29, making a total of 7c a share for the financial year.
Goodson said since the Reserve Bank easing, house prices have lifted and the reverse mortgage business is doing well for Heartland. "It has a finance business and we still have to figure out where the bad debt experiences are going to settle."
Smartpay , which provides Eftpos payment services, reported increased revenue in Australia and its share price gained 3.5c or 5.56 per cent to 66.5c.
Carpet maker Cavalier , up 1.5c or 4 per cent to 39c, said it was experiencing better-than-expected sales volumes since emerging from lockdown in New Zealand and the restrictions in Australia.
Transportation technology business Eroad, which has been admitted to the Australia Stock Exchange, is raising $50m through a $42m fully underwritten placement of shares at a 10.3 per cent discount of $3.90 a share, and $8m share purchase plan. Eroad's last trading price was $4.35, up 52 per cent over the past 12 months.