Rates concerns hits NZD harder than Brexit

  • 12/09/2016
Rates concerns hits NZD harder than Brexit

New Zealand shares plunged in the biggest sell-off since before Brexit, joining a global rout on concerns interest rates are set to rise and high-yielding companies will be hardest hit. Tower, Fletcher Building and Air New Zealand led the decline.

The S&P/NZX 50 Index dropped 188.84 points, or 2.5 percent, to 7,279.76. Within the index, 48 stocks fell, one rose and one was unchanged. Turnover was $131 million.

The local index's fall followed a Wall Street selloff on Friday after US Federal Reserve officials made comments which sparked fears of a rate hike as soon as next week. Markets across Asia fell this afternoon, though losses in the high-yielding NZX 50 outpaced those of Australia's S&P/ASX 200, Japan's Nikkei 225 and China's CSI 300.

"All of the types of companies and assets which have benefited from very low interest rates over recent years went in the other direction, and that's probably why we've followed suit to a greater degree than the other markets in this region," said Mark Lister, head of private wealth research at Craigs Investment Partners.

"We've been one of the best-performing markets of the year, our market's just gone up and up, it's really priced to perfection and due for a bit of a pullback. Also, many of the companies on the market are the high-yield dividend payers, and those are exactly the type of companies that stand to be the biggest losers from interest rates around the world going up."

Tower was the worst performer on the local index, falling 5.9 percent to $1.04.

Stocks fell across the board, and Lister said that while you would expect growth companies such as Fletcher Building, which dropped 4.4 percent to $10.61, or Air New Zealand, which fell 5.4 percent to $1.935, to be sensitive to market movements, more solid income stocks were also falling.

Meridian Energy dropped 4 percent to $2.88, Chorus fell 3.3 percent to $4.05, and Spark New Zealand dropped 3.2 percent to $3.63.

The only stock to gain was Investore Property, which rose 0.6 percent to $1.62.

Outside the main index, GeoOp fell 23.1 percent to 25 cents. The management app developer said it plans to raise $3.6 million in a discounted rights offer.

Pushpay rose 0.4 percent to $2.38. The mobile payments app developer will raise A$40 million as part of a secondary listing on the ASX in October in an effort to open up the shares to US investors.