Tower Insurance was the top performer over 2024 due to a lack of major insurance events. Photo / Tonga Red Cross Society
How did the New Zealand sharemarket fare in 2024?
The overall market - while a far cry from some of the strong performances seen in bigger markets - has not done badly, considering the economy has been in a recession and may still be in one, fund managers say.
The number of capital raises and big share transactions - culminating in the sale of Auckland Council’s remaining stake in Auckland Airport - shows there is strong demand for New Zealand stock, they say.
The S&P/NZX50 Gross Index, which counts dividend payments and share price appreciation, has gained 8.2% over the year.
The top 10 winners among the index constituents were Tower, up 122.6%, followed by Gentrack (101.2%), Vista (81.8%), Fonterra (68.9%), F&P Healthcare (58.9%), Hallenstein Glasson (58.6%), Westpac (52.2%), NZX (41.3%), Channel (36.9%) and a2 Milk (36.1%).
The top 10 losers were KMD Brands minus 48.67%, THL (48.65%), Spark (42.5%), Fletcher Building (38.7%), The Warehouse (33.9%), Heartland Bank (29.6%), Ryman (27.8%), Sky City (20.4%), Vital Healthcare (13.5%) and Genesis (8.4%).
A year refreshingly free of natural disasters helped propel Tower to the top of the list.
In its latest annual result, Tower said “large event” costs came to just $2.3 million, down from $55.6m in 2023.
On the downside, KMD Brands, THL, and Fletcher Building were all sharply down, reflecting the economic downturn.
However, Spark, which as a utility should have some resilience to economic trends, was also sharply down after missing its earnings guidance and being removed from a key global index.
The market’s overall 8.2% gain compares with a 28% rise in America’s S&P500 index, a 16% rise in Japan, and a 10. 5% rise in Australia.
However, the market’s performance was more in line with the United Kingdom (7.1%) and Europe (7.5%).
Craigs Investment Partners investment director Mark Lister said that while the market’s performance looked modest relative to others, it was still its best year in four.
“We have not done too badly, given the backdrop,” he said.
“Tower and Gentrack were the stars,” he said.
“Any stock that has doubled in value over 12 months has done something right.”
Another notable was dairy co-operative Fonterra.
“It has had several quite tough years and CEO Miles Hurrell has already achieved some wins,” Lister said.
F&P Healthcare’s near 60% gain would have had the biggest impact on the main indices, given its weighting as New Zealand’s biggest listed stock.
Lister also singled out exchange operator NZX for an honourable mention, following on from a few difficult years.
Among the losers, weakness in the cyclical stocks was to be expected, but few would have expected to see Spark fall in the way that it did.
“Spark is the one that is the odd one out there,” Lister said.
“As a telco you would expect it to hold its own, so that’s the one that not many of us would have picked to be down 40% at the start of the year.”
Fund managers have taken some comfort from the ease with which some big capital raises have taken place.
Then there was the sale of a near 10% block of Auckland Airport shares for $1.3 billion early this month.
“We have seen some pretty chunky blocks of shares put through this year,” Harbour Asset Management portfolio manager Shane Solly said.
“If you look at the market, it has digested some pretty big liquidity events.”
Through the year there have been big capital raises from Auckland Airport ($1.4b), Infratil $1.15b), Fletcher Building ($700m), Ryman ($902m) and Channel ($50m).
“Liquidity has attracted liquidity, and these events have brought more investors to the mix.”
Solly said the ease with which Auckland Council sold its stake could prove relevant for other local authorities looking to divest their utility assets next year.
Lister expects next year to be different.
“What is really intriguing is that this year you have seen all the highs from the United States, Japan, UK, Europe and Australia.
“All of those markets have hit new highs but the New Zealand market is 16% below its all time high in 2021, so we have very much been the laggard over the last two or three years,” Lister said.
“That’s a good thing when you are looking ahead, because it potentially means that we are not as highly priced, which puts us in a strong position as we drag ourselves out of recession in 2025.”
Forsyth Barr has strongly upgraded its target price for Hallenstein Glasson and rated it an outperform after the retailer gave a positive trading update on the first 18 weeks of its FY25 year.
Analysts Paul Laxton Koraua and Rohan Koreman-Smit reckon the company is now worth $10 per share, up from $8.30 off the back of more ambitious plans to roll out more stores in Australia as well as a bump in near term earnings.
Hallenstein reported sales up 10% for the early trading period with strong Australian sales offsetting its softer New Zealand business.
”We think the vastly improved retail fundamentals of its Glassons Australia business gives HLG license to expand its store base, which HLG is now actioning, targeting two to five net new stores per year in Australia over the medium term.”
The analysts said that although the New Zealand-based businesses had weaker performance at a store level profitability remained solid.
“Both brands have maintained their market share.”
They commended the turnaround of the Australian business over the last seven years and said it had been “impressive” growing from $1.5m in sales per store in FY2017 to in excess of $6m per store.
The Australian business now contributed more than half of the group’s net profits.
That turnaround had now given the business a “license to grow” in Australia where Hallenstein had traditionally taken a conservative approach opening just 1.1 stores per year on average over the past 20 years.
“This was a reasonable position to take in the context of the Australian business being broadly net profit after tax break-even for long stretches of HLG’s history.
“This is no longer the case. Over recent years, HLG has earned the licence to be more ambitious on its store opening strategy, but had not disclosed its intentions to be more ambitious on its growth strategy until now.”
While the analysts were upbeat on the stock they also expected volatility in the company’s margins ahead with potential supply chain shocks from US tariffs, foreign exchange volatility, and a weak domestic consumer market as well as competitive industry dynamics.
- Additional reporting Tamsyn Parker
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011
OPINION: Services for wāhine Māori and young mothers have been slashed.