Big Labor budget increases market share
New Zealand stocks rose as the government unveiled a budget that will send more fiscal stimulus into an already improving economy through increases in benefits and investments in infrastructure.
Thursday May 20, 2021, 6:31 p.m.
The S & P / NZX 50 Index gained 155.67 points, or 1.3%, to 12,437.17. Within the index, 21 stocks fell, 27 rose and two remained unchanged. The index is still down 7% since the start of the year.
Labor’s latest budget shed an encouraging light on the economy with a pledge to spend an additional $ 8-12 billion on infrastructure and an additional $ 440 million per year on new benefits.
“There is no doubt in our minds that the stimulus measures provided will give new impetus to the economy in the immediate future,” BNZ economists said in a note.
“The beneficiaries have a very high marginal propensity to consume, so this money will go to the communities in which they live. And, in general, the investment activity will have direct and indirect positive impacts on the economy ”.
This fiscal stimulus was accompanied by the Treasury which now forecasts that the economy will grow by 3.2% over the next 12 months, with this rate increasing until 2023.
A wide range of stocks rose, after weeks of gradual declines as investors welcomed the improved outlook and additional fiscal stimulus.
Synlait milk led the market higher, jumping 6.3% to $ 3.06 after a period of continued weakness. The milk processor’s biggest customer, A2 Milk, rose 2.9% to $ 5.66 – its first gain since declining profits last week.
Travel shares rose, Air New Zealand climbed 3% to $ 1.70 and Auckland International Airport rose 2.9% to $ 7.55, despite the announcement of its resignation by the general manager of the company.
Other stocks largely related to the economy rose, such as Meridian Energy which climbed 2.1% to $ 5.32 and Spark NZ rose 1.7% to $ 4.50. Both were among the most traded stocks that day.
Plexure shares plunged 14.5% to 65 cents after the company reported a loss of $ 8 million as operating costs rose even as the company struggled to hire new staff.
Existing customer revenues increased 15% to $ 29.2 million for the fiscal year ended March 31 and the company exceeded its underlying earnings guidance. The company attributed the overall loss to the increased investment in people to help grow the business.
Automated food processing systems company MHM Automation saw shares climb 3.2% to 64 cents after giving indications that profits would be at least $ 3.5 million, from $ 2.4 million of dollars last year.
A surprise in the budget was the slight downgrade in the government’s bond program.
Market participants expected a $ 20 billion cut over the next four fiscal years, but the budget only offered a $ 10 billion cut and left next year’s schedule unchanged.
The higher issuance rate is expected to further steepen the yield curve as long-term interest rates rise and short-term rates remain low.
The Kiwi dollar edged up after the budget announcement, but was still trading lower at 71.75 cents US by 3pm in Wellington, from 72.35 cents yesterday.
The trade-weighted index was at 74.70 by 3pm, down from 75.15 yesterday. The kiwi was trading at 92.71 Australian cents against 92.96 cents, 78.29 yen against 78.89 yen, 58.90 euro cents against 59.20 cents, 50.83 British pence against 51.00 pence and 4 , 6187 Chinese yuan against 4.6499 yuan.
Comments from our readers
no comments yet
Sign in to add your comment