The New Zealand share market has overall been less than spectacular, but a few star performers have bucked the malaise.
The New Zealand share market has overall been less than spectacular, but a few star performers have bucked the malaise.
The NZX top 50 index has effectively gone nowhere this year but it could have been worse.
As of lunchtime yesterday the index was down 0.23 per cent for the year to date. But at least there has been some recovery since October 30 when the market got as lowas 10,741.57.
If the year had ended then it would have been a 7 per cent drop. If the market manages to finish in the positive this year it would be the best year the NZX has had in the past three.
In 2022 the S&P/NZX50 index fell 12 per cent, with just 13 of the 50 member stocks finishing in the green. That came on top of 2021 when the index fell by 2.5 per cent.
Pacific Edge shares have fallen sharply this year. Photo / Thinkstock
Synlait Milk and its shareholder A2 Milk have also seen their share prices hit hard.
Synlait has a large debt payment due in March. It’s trying to sell its profitable Dairyworks business to pay for that but the offers have come up short. The low share price reflects the increasing likelihood it will have to raise capital.
A2 Milk is simply a sign of the faltering Chinese economy. Outside of those retailers, The Warehouse Group and KMD Brands have also come under pressures from difficult trading conditions.
Online travel booking specialist Serko has had a boost to its business with the return of travel. Photo / NZME
Best performers
On the flipside, the top performer has been travel software company Serko which has recovered strongly with the rebound in tourism after Covid. Its shares are up more than 90 per cent for the year.
More surprising is Sky Network Television. It has had a more rocky year with challenges from the launch of its new set-top box. A mystery bidder, which later vanished into thin air may have helped prop up the shares.
Meanwhile, third-best performer Infratil is much more deserving with it pulling off the biggest deal of the year by acquiring the other half of One NZ. Its shares have risen by 14 per cent.
Mercury NZ was the only other company to see double digital percentage growth in its share price.
Tuners Automotive Group has had a strong run and is set to be included in the NZX50.
Best and worst moments on the share market
Craigs Investment Partners investment director Mark Lister reckons the best moment for him on the share market this year has been the success of Turners Automotive.
“Its share price is up 45 per cent and over the past five years, it’s returned almost 25 per cent per annum to investors, which is a fantastic achievement during a difficult period.
“The company has done a great job increasing market share, building its brand, steadily growing earnings and dividends, and simply getting on with things and doing what they’ve said they’ll do.”
An added reward is its forthcoming inclusion in the NZX 50 index, which is another tick for credibility and should grow the profile of the business as an investment even further, Lister said.
His biggest disappointments were A2 Milk and Synlait.
“The Chinese economy has been weak, and it hasn’t reopened with the same vigour that many expected. That’s impacted demand, while sentiment has also taken a hit because of declining birth rates and repositioning the supply chains away from the grey market has been a disruptive and expensive exercise.
“Investors have been rewarded for ignoring these stocks in recent years.”
Greg Smith, head of retail at Devon Funds Management, said the worst and best things happened pretty close together, and both were due to bond yields.
“The best thing has been declining bond yields, coincident with falling rates of inflation and the central banks signalling they are about done with rate hikes. The US 10-year yield is now back at almost 4 per cent.
“Conversely, the worst thing was the acceleration of bond yields through October (the US 10-year hit 5 per cent the highest level in 16 years). This was also as the Israel/Hamas conflict came from left field and added another dimension to go with existing market uncertainties — concern here has since subsided.”
In terms of individual stocks, Smith points to Fisher & Paykel Healthcare as being a stand-out performer this year.
“My Food Bag hitting 12 cents and Synlait Milk hitting its lowest level in 20 years were clear lowlights.”
What will the NZX do in 2024?
Lister is optimistic about the local market in 2024 and predicts it will rise 10 to 12 per cent.
“I think the New Zealand economy will slow, but we’ll avoid recession. Migration is strong, house prices rebounding, business confidence is at an eight-year high and it’s getting much easier to find staff as the labour market eases.
“Our companies are in good shape, balance sheets are strong and we have some great management teams in place.”
Lister said the gross dividend yield for the NZX 50 is 4.5 per cent at the moment, close to a five-year high.
“That’ll start to look increasingly attractive as the Reserve Bank moves closer to cutting interest rates and investors realise that term deposits were only ever a short-term strategy.
“Our market has gone sideways this year, after consecutive declines in 2021 and 2022. We’ve lagged most other markets by quite a bit, and world shares have rallied almost 20 per cent this year. There’s less heat in our market and the bar is lower, while we have the right balance of stable, defensive, good quality businesses for the economic backdrop we’re looking at in 2024.”
Smith is also more upbeat about next year.
“The GDP print (a contraction of 0.3) is a reminder of the challenges the economy faces. But if the RBNZ also wraps up its tightening and starts cutting rates through next year, the NZX50 could have a strong year (particularly the second half) if the world economy sees a soft landing. In this scenario, we could see the NZX50 back above 13,000.
“China will also be key and we will also need to see some momentum in NZ’s largest trading partner.”
