Business & Investing: NZX puts stock in trading halt after 'administrative error', while NZ and Australian sharemarkets barely moved last week
After multiple postponements, Air New Zealand’s rights issue finally went ahead last week.
However, things got off to a rocky start when there appeared to be confusion between the parties involved in the transaction relating to the terms and the reference price of the rights.
NZX product operations was forced to put the stock in a trading halt not long after trading began last Monday after, unbelievably, discovering that the reference price of the rights on its website was incorrect.
The exchange subsequently termed the mistake an “administrative error” and said in a statement that steps were immediately taken to correct the pricing anomaly and ensure market integrity was maintained.
It said no rights were traded while incorrect prices were in the market, and it apologised for the confusion it caused investors and market participants.
Investors themselves seemed to struggle understanding the terms of the rights issue with pricing anomalies forcing the stock exchange’s independent regulator, NZRegCo, to also step in and issue a rare clarifying statement reiterating the terms of the rights issue.
The whole situation appeared sloppy and highlighted poor communication between Air New Zealand as the issuing company, the investment banks managing the transaction and the NZX itself as the market operator.
For the sake of investor confidence, and the reputation of the New Zealand market, it’s to be hoped lessons have been learned and a more robust process is established for any future transactions involving renounceable rights issues, particularly given the higher level of retail participation in the market in recent years.
NZ share market hugs the centre line, while US stocks retreat
Both the NZ and Australian sharemarkets barely moved last week, while stocks in the US eased.
The NZX50 fell 13 points or 0.1 percent for the week to 12,066 as it continues to hold above the key 12,000 support level where it has hovered around for the past three months, while Australia’s ASX200 index advanced just 4 points to 7,478.
US stocks recorded a weekly decline for the first time in almost a month, as hawkish comments from Federal Reserve officials paved the way for a rapid decline in the central bank’s balance sheet and weighed on prices.
The benchmark S&P 500 fell 1.3 percent for the week to 4,488 ending three weeks of recovery after the initial fallout selloff from Russia’s invasion of Ukraine. The technology-heavy Nasdaq Composite also fell sharply declining 3.9 per cent for the week.
In Europe, a short-lived bout of enthusiasm for European equities has been all but wiped out by the war. Outflows from European stock funds hit an all-time high of US$5.5b in March, unwinding virtually all of the US$6.1b of inflows witnessed in January, which had been the strongest burst of buying in the region since 2015.
US Federal Reserve to begin shrinking its balance sheet
The Fed revealed plans to shrink its US$9 trillion balance sheet by more than US$1t a year, a much quicker rate than had been anticipated, at the same time as it proposes raising interest rates in an effort to combat soaring inflation.
Some analysts are optimistic this could result in a potential trade off, whereby the Fed may not need to hike rates as aggressively as planned since quantitative tightening should help to slow the economy.
However, the pace of the Fed’s proposed balance sheet reduction weighed on longer-dated Treasury prices, which move inversely to yields. The prospect of rising interest rates tends to affect shorter-dated yields more.
As attention shifted this week from rate increases to the proposed balance sheet runoff, it helped to push yields on longer-dated Treasuries higher. As a result, the yield on the 10-year US Treasury note, which influences borrowing costs worldwide, rose to 2.71 percent on Friday, a level not seen since February 2019, while the 2-year Treasury yield finished the week at 2.5 percent.
Last week’s moves follow the worst quarter of returns for the US Treasury market since at least 1973, as Russia’s invasion of Ukraine exacerbated pandemic-induced inflationary pressures, thereby clouding the economic outlook.
Inflation concerns push gold ETF purchases to record levels
The biggest winner from mounting inflation fears has seen investors retreating to gold with purchases of gold exchange traded products hitting an all-time record in March.
Total assets are now just 1.8 per cent below the all-time high recorded in October 2020, according to the World Gold Council.
Global net inflows into gold ETPs rose fivefold month-on-month to US$11.3b in March, according to data from BlackRock, eclipsing the previous peak of US$9.4b in July 2020. The surge in buying helped push the gold price close to its all-time high in early March, although it has since eased back.
Gold finished the week up 1.1 percent at US$1947/ounce.
Oil prices ease along with cryptos
Brent crude oil futures eased 2 percent for the week to close at $US102 a barrel, its lowest close since just before Russia invaded Ukraine, after IEA countries announced plans to release crude from their strategic reserves.
Last week all 31 members of the International Energy Agency (IEA) - which includes New Zealand - agreed to an emergency release of 120 million barrels of oil to help offset the curtailment of Russian exports.
Energy Minister Megan Woods said New Zealand's contribution included about 299,000 barrels of diesel held in the UK and about 184,000 barrels of crude oil in Spain.
Members of the IEA are required to hold stocks equivalent to at least 90 days of net oil imports. New Zealand buys and holds emergency reserve stocks offshore.
Crypto currencies also eased last week with Bitcoin and Ethereum falling 8 percent to US$42,600 and US$3200 respectively.
Russia attempts to deal with economic fallout from Ukraine invasion
Russia’s central bank cut interest rates last week in a bid to cushion the economy from the impact of Western sanctions, saying the recent rebound in the rouble had eased inflationary pressures.
The Bank of Russia said it would lower its key interest rate to 17 percent from its previous high of 20 percent. It had more than doubled borrowing costs in late February after Russia’s invasion of Ukraine in an effort to prop up the currency after the US and Western allies imposed severe sanctions, including the freezing of a large chunk of its foreign reserves.
The rouble has rebounded from a steep decline immediately after the February 24 invasion as a result of stringent controls which curbed Russians’ ability to buy foreign currency and blocked foreigners from exiting their investments in Russia. The rouble traded at roughly 79 to the dollar on Friday, close to pre-invasion levels.
Economists at the Institute of International Finance have estimated that Russian gross domestic product will shrink by 15 percent this year, wiping out more than a decade and a half of growth.
Coming up this week
Monday
- NZME AGM
- Electronic Card Transactions (March) - Stats NZ
Wednesday
- Reserve Bank Monetary Policy Review
- Food Price Index (March) - Stats NZ
- Rental Price Indexes (March) - Stats NZ
