Sharemarket rebounds, starting February on a positive note after a 'rough' January

Tuesday, 1 February 2022

The sharemarket rebounded in line with overseas markets, starting February on a positive note after a tumultuous January that was driven by nervousness about the outlook for higher interest rates.

The benchmark S&P/NZX 50 Index jumped 1.4 per cent, or 169.542 points, to 12,058.94 on Tuesday. The index shed 8.8 per cent in January, marking its worst month since March 2020 when Covid-19 hit.

“We are really just following suit as some of those international markets stabilise and rebound a little bit, having had a pretty rough ride in January,” said Craigs Investment Partners head of private wealth research Mark Lister. “It’s a bit of a bounce back after markets being quite heavily sold off.”

The rebound was across the board, with about two thirds of the market posting gains, he said.

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**

“I suspect it’s really just people starting to see a bit of value emerge after some heavy falls for some of these companies,” Lister said. “Maybe they were just oversold a little bit in the short term.”

The largest stock on the index, Fisher & Paykel Healthcare, jumped 4.5 per cent to $29, having dropped 11 per cent so far this year.

The medical device maker was a good quality stock which had been sold off, Lister said. A decline in the local currency would also help the company as the bulk of its business was in North America, he said.

Lister said the local market would probably follow overseas trends in the absence of any company news to drive individual stocks. Corporate news isn’t expected to flow until later this month when companies with a December 31 balance date are due to start reporting their earnings.

Still, Lister said rising inflation and higher interest rates would remain the big theme for much of 2022 and a positive start to February did not mean volatility was over for the year.

“Markets all year are going to be grappling with the fact that inflation is annoyingly high, central banks are getting increasingly nervous about that, and are becoming very reactive and wanting to crank up interest rates in response,” he said.

“You are going to see financial markets, housing markets, consumers, and borrowers across the board react to that,” he said. “I think these ups and downs are probably going to be with us for a little while and I wouldn’t be at all surprised if you see some of that nervousness re-emerge at some point.”

New Zealand King Salmon dropped 12 per cent to $1.07 after warning that its profit would be impacted this year and next year as warmer sea temperatures killed more fish than expected, particularly in the Pelorus Sound. Pre-tax earnings this year were now expected to be between $6.5 million and $7.5m, down from a previous estimate of $10.5m to $12.5m, the company said.

The company is waiting on the result of a resource consent hearing, to see if it can move to the cooler, deeper and faster current conditions of the Cook Strait. The resource consent hearing was completed in December and a decision is expected in the next few months, it said.

Elsewhere in Asia, shares gained on Tuesday, mirroring broad overnight gains on Wall Street, while trading in China and most other regional markets was closed for Lunar New Year holidays.

Japan's benchmark Nikkei 225 edged up 0.5 per cent in morning trading, while Australia's S&P/ASX 200 gained 0.4 per cent.

In the US on Monday, the S&P 500 came back from an early dip to close 1.9 per cent higher at 4,515.55. The benchmark index fell 5.3 per cent in January, its worst month since falling 12.5 per cent in March 2020, when it plunged after the pandemic suddenly shut down the global economy.

- With AP