New Zealand shares dropped as the reality of the trade war between the US and China becomes clear, popping the bubble of optimism after President Donald Trump hit pause on his tariff regime for the rest of the world.
The S&P/NZX 50 index fell 182.3 points, or 1.5%, to 12,019.13, taking its weekly decline to 1.7%.
Stocks across Asia were mixed, with China’s Shanghai Composite up 0.6% in afternoon trading and Hong Kong’s Hang Seng advancing 0.7%, while Australia’s S&P/ASX 200 declined 1.3% and Japan’s Nikkei 225 index sank 4.3%. S&P 500 futures are pointing to a 0.1% increase.
“Trade and economic policy uncertainty has been very high for months now but really erupted this week,” Westpac NZ chief economist Kelly Eckhold said in a note. “Financial markets swung wildly, especially in equity markets which ranged widely and where implied volatility levels have moved up towards the levels seen only during covid, the 2012 European debt crisis and the 2008 global financial crisis.”
Trump had threatened to upend the global trade order with a raft of tariffs on every country, but put a 90-day pause on most of them while the US attempts to negotiate country-by-country.
He then ratcheted up tariffs on China, which had already responded in kind, triggering an escalation in tensions between the world’s two biggest economies.
Fluid times
“None of this is set in stone, as negotiations are ongoing, and US tariffs on non-Chinese imports are to be reviewed again in three months,” Westpac’s Eckhold said. “And frankly, the US and China are not negotiating right now but are engaging in tit-for-tat retaliation. Hence uncertainty will remain very high.”
The kiwi dollar traded at 57.64 US cents at 5pm in Auckland from 57.53 cents at 7am and up from 56.94 cents yesterday.
Among three of the most exposed NZX-listed companies are retailer KMD Brands, rubber goods maker Skellerup Holdings and rental campervan operator Tourism Holdings, which have all dropped more than 10% so far this month.
KMD fell 5.9% to 32 cents, while Skellerup dropped 5.1% to $4.13 and Tourism Holdings declined 4.3% to $1.57.
Ebos Group led the benchmark index lower, falling 6.4% to $36.10, below the $36.65 price paid by institutional investors in a $217 million placement. The healthcare products maker is raising another $54 million from retail investors in a share purchase plan, with the proceeds helping pay for recent acquisitions.
Kiwi Property Group posted the biggest gain on the day, up 1.8% at 86.5 cents, while Vital Healthcare Property Trust advanced 1.8% to $1.73 and Property for Industry increased 1.4% to $2.135.
Spark New Zealand was the most heavily traded stock on a volume of 2.2 million shares, falling 1.2% to $2.05.
Reporting by Paul McBeth. Image from Aaron Burden on Unsplash.