Broader NZ Market Closes Higher Amidst Broad-based Buying

Image Souce: Krish Capital Pty Ltd

Index Update: On 21^st October, the broader NZ market ended in green as energy sector witnessed buying momentum. On the same day, S&P/NZX 50 Index rose by 0.77% to end the session at 12,923.220 and S&P/NZX 20 Index increased 0.64% to 7,800.870. Also, S&P/NZX All Energy witnessed a rise of 2.67% to end the session at 1,650.810 and S&P/NZX All Materials rose by 2.62%. However, S&P/NZX All Communications Services encountered a decline of 1.12%.  

Macro Update: The Treasury released financial statements of the government of NZ for the year ended 30 June 2024. The financial statements demonstrate that the core crown tax revenue of $120.6 Bn was $8.2 Bn higher than the 2022/23 financial year and core Crown expenses of $139.0 Bn were $11.4 Bn higher. The Crown’s operating balance before gains and losses (or OBEGAL) deficit widened by ~$3.4 Bn to reach $12.9 Bn.

Top Market Movers: Among top gainers, Savor Limited (NZX: SVR) witnessed a rise of 10.53% to end the session at NZ$0.210 per share and Accordant Group Limited (NZX: AGL) rose by 9.89%. On the other hand, Synlait Milk Limited (NZX: SML) declined by 8.05%.

Commodity Update:  On Monday, the dollar index held steady after China's prime rate cut. At the same time, gold soared to a record high amidst escalating Middle East conflicts and an exceptionally close U.S. presidential election. Gold climbed 0.54% to $2,744.90 per ounce, silver rose 3.01% to $34.24 per ounce, and copper increased by 1.01% to $9,728.50 per ton. Meanwhile, Brent crude futures inched up 0.2% to $73.21, following significant losses last week. Traders remain focused on demand signals and potential supply disruptions in the Middle East, contributing to market volatility.

Source: Trading View, Analysis: Kalkine Group

In July 2024, the S&P/NZX 50 index broke above both the neckline of a Head and Shoulders pattern on the daily chart and a key resistance level at its 2023 high. This breakout suggests that the uptrend, which began in November 2023, is likely to continue and may drive the index toward its 2021 historical high. Moreover, the index surpassed its previous peak in the last trading session, providing more support to the previous recommendation. Additionally, the 14-day Relative Strength Index (RSI) is rebounding from its midpoint, indicating positive market sentiment in the short term.

Our Stance: It could be said that the broader NZ market was helped by the significant buying witnessed in the energy sector. The China's interest rate cut hints at the proactive economic measures. This action can help global sentiments. However, the investors are required to be cautious about the US presidential elections, which might make the broader global markets volatile. Therefore, investors are required to be cautious as market volatility can offer both challenges and rewards.