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The kiwi dollar lifted about half a cent against the aussie as more interest rate hikes were priced in.
The New Zealand dollar rose after Westpac economists raised their expectation for interest rates.
In their latest Economic Overview published at 5am on Tuesday, Westpac economists forecast 25 basis points hikes at consecutive Reserve Bank meetings in May, July and August, taking the Official Cash Rate (OCR) from 5.25% to a peak of 6%, up from their previous forecast for a peak of 5.5%.
“We take the view that getting inflation back to sustainable levels won’t be easy and that more mahi is required to achieve this goal within a reasonable timeframe,” said Westpac chief economist Kelly Eckhold. “Inflation has already been outside the target range almost two years, and our projections indicate it’s going to take another 18 months to get inflation back within the band.
“We see the OCR rising further to 6% by August and remaining there until mid-2024 when it should be clearer that inflation pressures have substantially moderated.”
Markets have fully priced in a 25bp hike at next week’s Reserve Bank meeting which would take the OCR to 5.5%. Following Westpac’s report, markets priced in a 35% chance of a further hike by August.
The kiwi rose half a cent against the aussie following the report. In late afternoon trading on Tuesday the kiwi was at A93.40 cents compared with A92.90c before the report.
Reserve Bank of New Zealand
The path back to low inflation – Reserve Bank of New Zealand chief economist Paul Conway
The benchmark S&P/NZX 50 Index added 0.07%, or 8.267 points, to 11,945.87 on Tuesday. On the broader market 63 stocks rose and 56 fell with $131 million shares traded.
Synlait Milk was the biggest stock traded by volume, with 6.2 million shares changing hands.
The company’s shares have lost 60% of their value this year and closed unchanged at $1.41.
Devon Funds Management head of retail Greg Smith said investor sentiment towards Synlait had soured after the company downgraded its earnings guidance, with the stock trading at around half its $3 net asset value.
Investors were uncertain about the outlook and the market appeared to be acknowledging the prospect of a capital raise, he said.
“It’s a bit unusual if everything is in good shape for a company to be trading at that significant a discount for too long,” he said, noting that there is some support for the shares at current levels.
Hallenstein Glasson Holdings dropped 6.9% to $5.80%. The retailer’s shares have weakened following a strong run ahead of its inclusion in the NZX50 benchmark last week as investors who track the index acquired the stock.
Manawa Energy reported a profit of $444m in the year to the end of March, up from $120m the previous year, as it benefited from the sale of Trustpower’s retail business. Manawa sold Trustpower’s retail business to Mercury for a total of $469m in May last year, and booked a gain on the sale of $342m.
Manawa’s earnings from continuing operations fell to $137m from $160m, with the biggest decline coming from a fall in the value of the company’s carbon credits. Carbon prices fell from $76 a unit to $55 a unit across the year, pulling the value of the company’s carbon credits down by $12m.
The company said it expects to receive $20m to $28m in the coming financial year from the sale of surplus land and carbon credits.
Manawa’s shares fell 1.6% to $4.90.
AFT Pharmaceuticals is expected to announce a maiden dividend when the drug company reports its full-year profit on Monday. Forsyth Barr analysts are forecasting a 3c dividend, which would equate to about 20% of profit. The analysts expect dividend payments to increase to 7c for the 2024 year, and 9c in 2025.
Normalised profit is expected to fall to $13.6m from $19.8m as the company ramps up investment, which the analysts say is the right strategy to drive future growth.
Forsyth Barr rates the stock “outperform” with a 12-month price target of $4.70. The shares closed unchanged at $3.37, and have lost 7.7% this year.
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