New Zealand shares joined a global slump as investors fretted over the prospect of a worldwide recession in the wake of bond market pricing. Heartland Group was among the few local stocks in positive territory after reporting solid earnings growth.
The S&P/NZX 50 Index dropped 145.65 points, or 1.3 per cent, to 10,704.11. Within the index, 39 stocks fell, four rose, and seven were unchanged. Turnover was $134.5 million on a volume of 27.1 million shares, slightly more than the 90-day average of 25.6 million.
Stock markets across Asia took their cues from a weak performance on Wall Street after the US Treasury yield curve inverted - where the rate on long-term bonds is lower than on short-term - for the first time since 2007. A sustained inversion is often seen as a sign of a looming recession. Australia's S&P/ASX 200 Index dropped 2.7 per cent in afternoon trading, the worst performer across Asia Pacific, while Japan's Topix was down 1.1 per cent and Singapore's Straits Times Index fell 1.5 per cent.
New Zealand's benchmark index is the second-best performer so far this year, with the NZX50 up 21.5 per cent, just behind China's CSI 300 Index which is up 21.7 per cent.
Matt Goodson, managing director at Salt Funds Management, said volumes weren't very heavy, which is what typically comes when markets capitulate to a major slump, and that today's slide is against the backdrop of a strong performance so far this year.
"Our market has performed incredibly well," he said. "The key risk is not the discount rate, it is: can you still deliver earnings expectations? That's why New Zealand has been a somewhat defensive market with the gen-tailers and Spark and the likes."
Chorus led the market lower, down 4 per cent at $5.35 on a volume of 548,000 shares, more than its 472,000 average. Genesis Energy dropped 2.7 per cent to $3.27, Meridian Energy declined 1.9 per cent to $4.75 and Infratil decreased 1.5 per cent to $4.75.
Spark New Zealand fell 1.1 per cent to $4.025 on a volume of just 1.5 million shares, about half its average volume. Fletcher Building was the most traded stock, falling 1.5 per cent to $4.56 on a volume of 2.8 million, more than twice its 1 million average. Kiwi Property Group declined 0.6 per cent to $1.63 on a volume of 2.6 million shares.
Of other stocks trading on volumes of more than a million shares, Goodman Property Trust increased 0.2 per cent to $2.145, Contact Energy decreased 0.5 per cent to $8.34, Ryman Healthcare was down 1.1 per cent at $13.11, Arvida Group declined 0.7 per cent to $1.39 and Auckland International Airport was up 0.5 per cent at $9.65.
Heartland was one of the few stocks to gain, up 0.6 per cent at $1.63 after reporting a 9 per cent lift in annual profit as its reverse mortgage, business and motor lending businesses improved lending. Goodson said the result was in line with expectations.
Of other companies that have reported this week, SkyCity Entertainment Group dropped 3 per cent to $3.85, Summerset Group fell 2.7 per cent to $5.74, and NZX declined 2.4 per cent to $1.20. Outside the NZX50, Colonial Motor Co fell 4.4 per cent to $8.70, and PGG Wrightson rose 4.6 per cent to $2.26.
Oceania Healthcare rose 1 per cent to $1.04 on a volume of 894,000 shares, more than its 671,000 average. It posted the day's biggest gain.
Wellington International Airport's 2025 bonds paying annual interest of 5 per cent were the most traded debt security on a volume of 3.02 million. The notes closed at a yield of 2.13 per cent, down 4 basis points. Auckland Council's 2026 bonds paying 3.34 per cent interest traded on a volume of 3 million and closed at a yield of 1.51 per cent, down 17 basis points.