Sell-off in Communication Services Sector Weighs Over Broader NZ Market

Image Source : Krish Capital Pty Ltd

Index Update: On 21st February 2025, significant decline in the broader communication services sector impacted the NZ market. On the same day, S&P/NZX 50 Index witnessed a decline of 0.99% to end at 12,752.580 and S&P/NZX 20 Index fell by 1.13% to close at 7,656.110. Also, S&P/NZX 10 Index witnessed a decline of 1.52% to 12,605.420. On the same day, S&P/NZX All Communications Services encountered a fall of 10.29% to end at 2,083.630.  

Macro Update: Recently, RBNZ stated that economic growth is anticipated to recover during 2025. Notably, lower interest rates are expected to encourage spending, although elevated global economic uncertainty can weigh on business investment decisions. The increased prices for some of the key commodities as well as a lower exchange rate would increase export revenues. Notably, employment growth is anticipated to pick up in the H2 as the domestic economy recovers.  

Top Market Movers: Among top gainers, AoFrio Limited (NZX: AOF) witnessed a rise of 5.77% to end at $0.11 per share. On the other hand, Spark New Zealand Limited (NZX: SPK) declined by 18.77%.  

Commodity Update: The U.S. dollar dropped on Friday after a report showed a decline in monthly retail sales and a surprise drop in consumer sentiment for February. These figures, coupled with a higher-than-expected inflation rate for January, signalled that consumers might be cautious about U.S. President Donald Trump's policies, especially his proposed tariffs, affecting their purchasing power. In the commodities market, gold remained steady at $2,956.10, while silver fell 0.11% to $33.43. Copper rose 0.15% to $9,565.20. Brent oil gained 0.20% to $76.64, driven by lower U.S. gasoline inventories and concerns over Russian supply disruptions. 

Source: Trading View, Analysis: Kalkine Group   

In July 2024, the S&P/NZX 50 index surpassed both the neckline of a Head and Shoulders pattern on the daily chart and a key resistance level marked by its 2023 high. This breakout indicates that the uptrend, which started in November 2023, is likely to persist and could push the index toward its historical peak from 2021. Despite the ongoing correction, the index is still developing higher highs and higher lows, anticipating a continuation of the prevailing uptrend. Meanwhile, the 14-day Relative Strength Index (RSI) is hovering around its midpoint, reflecting neutral market sentiment in the short-term.   

Our Stance: It could be said that the sell-off in the communication services sector weighed over the broader NZ market. RBNZ stated that consumer price inflation in NZ is anticipated to be volatile in the near term because of a lower exchange rate and higher petrol prices. The net effect of future changes in trade policy on inflation in NZ remains uncertain. Also, global geopolitical developments might also impact the performance of NZ equities moving forward.