Business & Investing: Government’s housing announcement takes a chunk out of the NZ$, Plus: Retirement village stocks also hit

The NZ dollar has fallen almost 2c or 2.6 percent in the wake of the government’s housing policy announcement on Tuesday, as traders bet measures to cool the white-hot housing market will lessen the likelihood of rate hikes by the Reserve Bank.

It’s the currency’s biggest one-day fall since the pandemic induced selloff in March last year.

While the fall is welcome news for exporters who have been under pressure in recent months while the currency remained stubbornly above 70 US cents, the weaker dollar is likely to result in petrol price hikes at the pump in coming days and increased costs for imports in the months ahead.

Westpac Bank economist Satish Ranchod said the new housing policy announcements “indicate significant downside risk for house prices and economic activity more generally.”

The consensus view is the new policy could result in house prices falling by as much as 10 percent, though this would only take prices back to pre-Christmas levels.

The kiwi was trading last night at 69.7 US cents, a four month low. Since peaking at 74.6 US cents in late February, the dollar has now fallen almost 7 percent.

Retirement village stocks weaken following housing announcement

Listed retirement village stocks took a hit yesterday in the wake of the government’s housing policy announcement as investors mulled the implications of potential housing market weakness on retirees wanting to sell their homes.

Shares in Arvida Group fell 2.4 percent to $1.66, Ryman Healthcare declined 1.3 percent to $15.21, and Summerset Holdings was down 1.2 percent at $12.08.

Oceania Healthcare shares fell 4.3 percent to $1.33 after the company completed the first phase of its $100m capital raise to fund the purchase of an existing retirement village and new land for development. Shares were sold in the offer at $1.30.

The aged care provider is aiming to raise $20m in a retail offer that opens today.

Westpac considers selling off its New Zealand arm in response to RBNZ criticism

There will be plenty of interest and speculation following Westpac’s announcement yesterday that it is considering splitting off its local operation as part of a demerger that could mean the return of at least one trading bank back into New Zealand ownership.

However, the bank says the review is at “a very early stage” and no decisions have been made.

It said it had been “assessing the appropriate structure for its NZ business and whether a demerger would be in the best interests of shareholders”.

The announcement is timely given the impact of the Reserve Bank of New Zealand’s latest regulatory move against the NZ subsidiary announced yesterday, Westpac said.

The Reserve Bank has ordered the bank to commission two reports, one on Westpac NZ’s risk governance processes and practices and the other to provide assurance that the steps Westpac NZ has taken are effective.

“Given the changing capital requirements in NZ and the RBNZ requirement to structurally separate Westpac’s NZ business operations from its operations in Australia, it is now appropriate to assess the best structure for these businesses going forward,” it said in a statement to the ASX.

“Westpac will provide further updates as required.”

In 2006, the RBNZ forced Westpac to create a NZ subsidiary. Previously it had operated its NZ business as a branch.

The Reserve Bank had previously intended to increase the amount of capital NZ banks have to carry by around $20 billion, phased in over a seven-year period, but it postponed its implementation until at least July 1, 2022 because of the Covid-19 pandemic.

The RBNZ said it also had concerns about Westpac NZ’s governance processes.

“We have experienced ongoing compliance issues with Westpac NZ over recent years, most recently involving material failures to report liquidity correctly, in line with RBNZ’s liquidity requirements,” the central bank said in a statement.

“Furthermore, the bank has continued to operate outside its own risk settings for technology for a number of years said Geoff Bascand, RBNZ deputy governor and general manager of financial stability.

“Westpac NZ needs to take a close look at its risk governance practices.”

Westpac shares on the NZX closed down 1 percent yesterday at $26.35.

Mortgage lending continues to ramp higher in February

Mortgage lending rose 36.2 percent in February, with a total value of $7.6 billion in new mortgages established during the month.

Investors increased their share of borrowing, accounting for 24.4 percent of total lending, up from 20.3 percent in February last year, although down slightly from 26 percent in January.

First-home buyers accounted for 15.6 percent of new lending, down from 16.2 percent in January and down from 16.8 percent in February last year.

Borrowing against houses for business purposes remained marginal, falling to $52 million in February from $58m in February last year.

Of the new lending, only 7.8 percent went to borrowers with less than a 20 percent deposit, down from 10.1 percent in February last year.

Property data firm CoreLogic said high loan-to-valuation ratio lending to investors fell to 11 percent in the latest month from between 15 percent and 16 percent previously.

Investors accounted for 37.1 percent of interest-only lending in February, up from 32.9 percent in February last year.

Xero announces second acquisition this month

Online accounting software company Xero has announced yet another acquisition just a few weeks after confirming its previous one.

Xero said it has bought Tickstar, an e-invoicing infrastructure business serving businesses and governments around the world, for up to 150 million Swedish krona (NZ$24.9m), half in Xero shares.

Based in Sweden, Tickstar was founded in 2007.

The purchase follows its acquisition of purchase of Copenhagen-based Planday announced, earlier this month, which was also partly paid for in Xero shares.

Xero said Tickstar allows organisations such as Xero and its customers to connect to a global e-invoicing network, and the acquisition aligns with Xero’s strategic priority to drive the adoption of cloud accounting.

Following the acquisition, Xero said it would leverage Tickstar’s technology to support Xero’s e-invoicing functionality.

“The acquisition of Tickstar is an important step in our strategy to help small businesses digitise more of their workflows and get paid faster using cloud-based technologies,” said Xero’s chief product officer, Anna Curzon.

“As more governments around the world adopt e-invoicing, Tickstar’s technology will help our customers comply with existing and future legislation and realise the many benefits that e-invoicing brings.”

Xero shares closed yesterday on the ASX at A$123.47, up 1.9 percent.

FMA issues direction order to Rockfort Markets for misleading advertising claims

The Financial Markets Authority (FMA) has pinged licensed derivatives issuer Rockfort Markets directing it to remove or amend misleading advertising statements on its social media channels and website.

The FMA said it became aware that certain statements in Rockfort’s Facebook advertisements and on its website, created the impression that trading in derivatives was “safe” or had not presented a balanced view of the risks. In fact, trading in derivatives, and in particular CFDs (contracts for difference) offered by Rockfort is inherently risky the FMA said.

The regulator found Rockfort had other statements on its website that were likely to mislead investors or were unsubstantiated, including claims that Rockfort exceeded the requirements of the relevant legislation by keeping separate client money from operating money when this is in fact a legislative requirement licensed derivatives issuers are required to adhere to. In addition, Rockfort promoted itself as a licensed and regulated “forex and share broker”, when its licence is as a derivates issuer and these services are not licensed in New Zealand.

In addition, the FMA found Rockfort failed to provide a prominent statement that a Product Disclosure Statement (PDS) is available. The FMA identified that certain Rockfort advertisements did not include this statement, and other advertising was inconsistent with the PDS.

The FMA said it had initially raised its concerns with Rockfort and the company took some steps to amend or remove its advertising materials, but the regulator considered its concerns were only partially addressed.

As a result, the FMA had since issued a direction order to Rockfort under s468 of the FMC Act, whereby the company was directed to remove or amend specified marketing materials or be subject to a more severe range of penalties.

Intel announces plans for US$20 billion investment in new manufacturing facilities

Newly appointed Intel CEO Pat Gelsinger has unveiled plans for a US$20 billion investment in two new US chipmaking facilities aimed at reasserting its position as the undisputed leader of the semiconductor industry, a claim many experts have said the company lost in the past several years.

“We are setting a course for a new era of innovation and product leadership at Intel,” Gelsinger said in a statement.

The company’s stock rose more than 6 percent in after-hours trading, while shares of competitor AMD fell more than 2 percent following the news. Shares in Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, tumbled more than 3 percent in Taipei yesterday following the announcement.

Gelsinger took over a company facing a host of challenges, including unprecedented competition from Apple, which has developed its own chips, and other former partners along with an activist shareholder demanding change.

The announcement comes amid a growing global chip shortage that has hampered industries ranging from autos to video games. It also comes nearly a year after Intel offered to help the US government increase domestic semiconductor manufacturing capacity, a move some US officials believed would bolster national security, as cutting edge microchips have crucial military and defence applications.

The new facilities, to be built in Arizona, will include capacity for some outside customers and Gelsinger said he plans to announce other expansions in the United States, Europe and elsewhere later this year.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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