NZ stocks turn as UK referendum result keeps investors guessing
By Paul McBeth
June 24 (BusinessDesk) - New Zealand shares gave up earlier gains as early results from Britain's referendum on whether to leave the European Union show the race is much closer than what pundits had been picking .
The S&P/NZX 50 index was down 0.5 percent to 6784.89 at 1.57pm, having been up 0.5 percent earlier in the day. The local bourse followed its Australian counterpart lower, with the S&P/ASX 200 Index recently down 1.3 percent as the UK vote results show a slight lead for Britain to stay in the EU.
Investors had been betting the 'remain' camp would romp home leading up to the polling booths closing, but bookmakers have since shortened those odds when early results showed more support for leaving than had been expected. The Guardian website has the 'remain' vote in front with 50.1 percent with about three-quarters of local authorities still to declare.
"The market's reacting on the ebbs and flows and will be for the rest of the day," said James Smalley, a director at Hamilton Hindin Greene in Christchurch. "People do need to realise after a fairly huge event, the world does go on and after this is priced in, what happens after that?"
Dual-listed bank Westpac Banking Corp was the biggest decliner on the NZX 50, down 3.4 percent to $29.95. New Zealand Refining Co declined 3.2 percent to $2.46 as Brent Crude oil prices dipped below US$50 a barrel, while milk marketer and exporter A2 Milk Co dropped 2.8 percent to $1.77. Port of Tauranga, New Zealand's biggest port operator, fell 2.7 percent to $19.08.
Smalley said equity markets will probably stay fairly volatile for the rest of the day as the uncertainty of the referendum's outcome remains, which will ultimately be decided in the UK's biggest cities such as London, Birmingham and Manchester.
Currency markets have more volatile, with the kiwi dollar trading between 71.22 US cents and 72.75 cents since polling booths closed at 9am New Zealand time. Volatility in the Sterling has been more pronounced, with the British pound trading between US$1.4052 and US$1.5012 since polling closed.
ANZ Bank New Zealand's Philip Borkin said the lack of liquidity meant foreign exchange movements were exaggerated, and if the UK sticks with the EU the kiwi may not be able to sustain its recent gains.
Movements in interest rate markets were less pronounced, with New Zealand's two-year swap rate down four basis points to 2.27 percent and 10-year swaps also down four basis points to 2.82 percent.