Sharemarket slips as investors eye higher interest rates ahead

Friday, 17 December 2021

The sharemarket slid into the weekend as the prospect of higher interest rates weighed on yield-sensitive stocks.

The benchmark S&P/NZX 50 Index dropped 59.604 points, or 0.5 per cent, to 12,717.94 on Friday.

Expectations for higher interest rates have picked up after figures released on Thursday showed the economy performed better than expected in the third quarter, shrinking 3.7 per cent compared with the 4.1 per cent decline expected in a Bloomberg survey of economists.

That’s negative for low growth yield stocks which are sensitive to interest rate increases.

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Property stocks are sensitive to rising interest rates.

“It really is thematically just higher interest rates reducing share prices. It’s a trend which has been going on for some time and will continue on over the next year and it’s really just an overall rebalancing of share prices – they rocketed up on very cheap money and that’s coming to an end, so now the inverse is happening,” said Hamilton Hindin Greene investment adviser Jeremy Sullivan.

The Federal Reserve also confirmed on Thursday New Zealand time that it would accelerate its pullback of economic stimulus and was likely to raise interest rates three times next year to tackle rising inflation.

The United States central bank planned to shrink its monthly bond purchases at twice the pace it previously announced, likely ending them altogether in March.

On the local market, top stock Fisher & Paykel Healthcare fell 1.6 per cent to $31.27. Ebos fell 2.3 per cent to $37.42. Spark fell 0.8 per cent to $4.49.

The real estate sector was the worst affected by the prospect of rising interest rates.

Goodman Property Trust fell 1.9 per cent to $2.58, Property For Industry dropped 2.5 per cent to $2.925, Stride shed 1 per cent to $2.05, Kiwi Property Group slipped 0.4 per cent to $1.15. Argosy Property bucked the trend, up 1.3 per cent to $1.62.

Retirement village stocks, which are weighted to property values, also slipped. Ryman Healthcare fell 0.4 per cent to $12.49, Summerset Group was down 2.8 per cent to $13.01, and Oceania Healthcare slipped 1.5 per cent to $1.33. Arvida Group was unchanged at $1.95.

Medicinal cannabis company Rua Bioscience jumped 14 per cent to 44 cents after announcing it had received verification enabling it to distribute its first medicine in New Zealand. Rua’s products will be available as a prescription-only medicine through GPs and specialists towards the end of its first quarter or early in its second quarter.

“It’s very positive news for them,” Sullivan said. “Investors will be pleased that they are going to get into the commercialisation of their marijuana.”

Fellow listed company Cannasouth gained 2.7 per cent to 37.5c.

Eroad gained 8.2 per cent to $5.52, after replacing Napier Port in the S&P/NZX 50 Index, prompting investors who track the benchmark to buy the stock.

Napier Port was up 1 per cent to $3.04 after chief executive Todd Dawson told the annual meeting of shareholders he expected the company’s underlying result from operating activities to increase by about 10 per cent for the new financial year.

Shares in residential property company Winton Land closed down 0.4 per cent at $3.87 in their first day of trading on the NZX following an initial public offering at $3.887 per share.