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Earnings

New Zealand stock market bounces off a multi-month low amid strong company earnings

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The New Zealand stock markets show signs of rebounding from a multi-month low amid strong company earnings reports. The NZX 50 rose 0.82%, to 12,220.17, registering a positive close for the third straight trading day.

A slew of strong company earnings lifted the local benchmark index this week. Construction, energy, and bank stocks led the local market gains. Fletcher Building jumped 5.64%, Infratil was up 2.63%, Contact Energy rose 2.68% on Thursday.

Fletcher Building’s net profit was up 41% from a year ago and gave a very positive outlook for the year ahead. Westpac bank soared 20% from its January low. The Australian bank announced a $A3.5 billion share buyback plan, with other banks expected to follow. Contact Energy was 8% higher than its low in January. The company delivered a strong half-year result, with1H22 EBITDA up 31%.

Optimism towards border reopenings and loosening Covid restrictions also lifted airline and tourism stocks. Air New Zealand shares price gained 15% from its January low.

However, tech shares are still weak with valuation downgraded in a tightening monetary cycle. Pushpay lost almost half of its market value since the last earnings report in November. Vista Group stocks plunged more than 40% from the high in September last year. Technology companies will need to keep investors interested with the high growth pace in the backdrop of high inflation and rising interest rates.

Seeka Limited will report half-year results on Friday. Next week, the local investors will be eyeing earnings for Meridian Energy, Spark New Zealand, Auckland Airport, and Air New Zealand.

New Zealand’s economy is on pace for a fast recovery from the pandemic, but the country is facing the same issue, a flaring inflation, as the other major economies. The fourth quarter NZ CPI soared to a 30-year high at 5.9% YoY. The Reserve Bank of New Zealand is expected to raise the Official Cash Rate (OCR) in each of its 7 meetings this year. In the current economic cycle, the value stocks could continue to outperform the growth sector.  


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