Latest / Best of Business / Remy Morgan: Milford Asset Management expert on the market reactions to the OCR cut

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Remy Morgan: Milford Asset Management expert on the market reactions to the OCR cut · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk zed B.
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  Speaker 2: Remy Morgan mil Fantastic Management is with me I Remy Hi. Ever, so,
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  Speaker 2: how has the market reacted to the OCR cut?
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  Speaker 3: Yeah, so the twenty five basis point cut today to
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  Speaker 3: three percent, that was largely expected. But what did surprise
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  Speaker 3: the market was the rbnz's revisions to its own projection
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  Speaker 3: for the official cash rate, which it now sees bottoming
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  Speaker 3: out at two point five five percent instead of two
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  Speaker 3: point eight five percent. And another surprise was the fact
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  Speaker 3: that two of the six committee members had voted for
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  Speaker 3: a fifty basis point cut at this meeting instead of
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  Speaker 3: twenty five. Now, given these signals from the RBNZ of
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  Speaker 3: further evening were beyond what the market had actually expected.
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  Speaker 3: Post the announcement, we saw New Zealand dollar swap rates
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  Speaker 3: moving lower, and we also saw a weakening of the
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  Speaker 3: New Zealand dollar, with the New Zealand to US dollar
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  Speaker 3: exchange rate falling over one on the day.
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  Speaker 2: What's the market expecting from here?
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  Speaker 3: Yeah, so, going into today's meeting, there was only about
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  Speaker 3: half of a cut priced for after today's announcement for
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  Speaker 3: the rest of the year, but we've actually seen the
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  Speaker 3: market revise that expectation now to more than one full
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  Speaker 3: cut before the end of the year. So whether that
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  Speaker 3: market view will be revised further from here will likely
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  Speaker 3: depend on how the economic data unfolds between now and
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  Speaker 3: the next Reserve Bank meeting in October.
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  Speaker 2: Okay, now we're obviously full swing into the reporting season.
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  Speaker 2: What did the market make of the Fletcher Building results today?
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  Speaker 3: Yeah, so overall it's been a challenging year for Fletcher
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  Speaker 3: with the tough market conditions in New Zealand, and that
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  Speaker 3: did weigh on the result. They did not provide any
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  Speaker 3: forward guidance, but what management did say was that they
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  Speaker 3: expect demand to remain soft over the next financial year,
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  Speaker 3: which could see limited earnings improvement, whereas the market had
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  Speaker 3: been expecting some improvement in the second half of next
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  Speaker 3: financial year. But while the economy remains tough, the company
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  Speaker 3: does continue to focus on reducing cost and is exploring
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  Speaker 3: business divestments. So we did see the share price bounce
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  Speaker 3: around a little bit throughout the day, but it closed
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  Speaker 3: roughly flat.
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  Speaker 2: And what was the reaction to Spark?
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  Speaker 3: Yes, so Spark also had a challenging year with economic
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  Speaker 3: and competitive pressures, but it does appear the business has
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  Speaker 3: stabilized after some significant cost reductions. Now, while the earnings
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  Speaker 3: outlook for next year is a bit lower than market expectations,
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  Speaker 3: perhaps the key piece of news was the fact that
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  Speaker 3: Spark reset its dividend policy to be based off of
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  Speaker 3: its new definition of free cash flow. Now. This will
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  Speaker 3: likely see next year's dividend reset lower than the twenty
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  Speaker 3: five cents per share that it paid this year. So
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  Speaker 3: while Spark delivered a week result, it was perhaps better
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  Speaker 3: than fared, and the prospect of further rate cuts by
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  Speaker 3: the RB and Z might have helped to lift sentiment
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  Speaker 3: a bit, and the stock finished up on the day.
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  Speaker 2: Thanks Remy, appreciate it Realmy Morgan Milford Asset Asset Managements.
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