Botched and confusing Air NZ rights issue | Writing

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Business & Investing: NZX halts shares after ‘administrative error’ as New Zealand and Australian stock markets barely budged last week

After several postponements, the issue of Air New Zealand’s rights finally took place last week.

However, things got off to a bad start when it emerged that there was confusion between the parties involved in the transaction regarding the terms and reference price of the rights.

Trading in NZX Commodities was forced to pause the stock shortly after trading began last Monday after it unbelievably discovered that the reference price for rights on its website was incorrect.

The exchange later called the error an “administrative error” and said in a statement that action was immediately taken to correct the pricing anomaly and ensure market integrity was maintained.

He said no rights were traded while incorrect prices were in the market, and he apologized for the confusion this caused investors and market participants.

Investors themselves appeared to be struggling to understand the terms of the rights issue, with pricing anomalies causing the exchange’s independent regulator, NZRegCo, to also step in and issue a rare clarifying statement reiterating the terms of the rights issue. rights issue.

The whole situation appeared sloppy and exposed poor communication between Air New Zealand as the issuing company, the investment banks handling the transaction and the NZX itself as the market operator.

In the interest of investor confidence and the reputation of the New Zealand market, it is to be hoped that lessons have been learned and that a a more robust process is in place for any future transactions involving waiveable rights issues, particularly given the higher level of retailer participation in the market in recent years.

New Zealand equity market hugs midline as US stocks retreat

New Zealand and Australian stock markets barely moved last week, while US stocks fell.

the NZX50 fell 13 points or 0.1% for the week to 12,066 as it continues to hold above the key 12,000 support level where it has been hovering for the past three months, while the Australia ASX200 the index rose just 4 points to 7,478.

U.S. stocks posted a weekly decline for the first time in nearly a month as hawkish comments from Federal Reserve officials paved the way for a rapid decline in the central bank’s balance sheet and weighed on prices.

The reference S&P500 fell 1.3% for the week to 4,488, ending a three-week rally after the initial sell-off on fallout from the Russian invasion of Ukraine. heavy technology Nasdaq Compound also fell 3.9% for the week.

In Europe, a short-lived bout of enthusiasm for European equities was all but wiped out by the war. European equity fund outflows affected an all-time high of US$5.5 billion in March, wiping out almost all of the US$6.1 billion in inflows recorded in January, which had been the biggest surge in purchases in the region since 2015.

The US Federal Reserve will begin to reduce its balance sheet

The Fed has revealed plans to shrink its US$9 trillion balance sheet by more than US$1 billion a year, a much faster pace than expected, while offering to raise interest rates in a bid to to fight against soaring inflation.

Some analysts are optimistic this could lead to a potential trade-off, in which the Fed may not need to raise rates as aggressively as expected, as quantitative tightening is expected to help slow the economy.

However, the pace of the Fed’s balance sheet reduction proposal has weighed on prices for longer-dated Treasuries, which move inversely to yields. The prospect of rising interest rates tends to affect shorter-term yields more.

As the focus this week shifted from rate hikes to the proposed balance sheet liquidation, it helped push yields higher on longer-dated Treasuries. As a result, the yield on the US 10-year Treasury note, which influences borrowing costs around the world, rose to 2.71% on Friday, a level not seen since February 2019, while the Treasury yield at 2-year ended the week at 2.5%.

Last week’s moves follow the worst quarter of returns for the US Treasury market since at least 1973, when Russia’s invasion of Ukraine exacerbated pandemic-induced inflationary pressures, darkening the economic outlook.

Inflation concerns push gold ETF buying to record highs

The biggest gainer from rising inflation fears saw investors fall back on gold with purchases of gold exchange-traded products hitting an all-time high in March.

According to the World Gold Council, total assets are now only 1.8% lower than the record high recorded in October 2020.

Global net inflows into gold ETPs quintupled month-over-month to $11.3 billion in March, BlackRock data shows, eclipsing the previous peak of $9.4 billion US in July 2020. Surging buying helped push the price of gold near its all-time high in early March, although it has since declined.

Gold ended the week up 1.1% at US$1,947 an ounce.

Oil Prices Fall With Cryptos

Brent crude oil futures fell 2% for the week to close at $102 a barrel, its lowest close since just before Russia invaded Ukraine, after the countries of the IEA have announced their intention to release crude from their strategic reserves.

Last week, the 31 members of the International Energy Agency (IEA) – including New Zealand – agreed to an emergency release of 120 million barrels of oil to help offset reduced exports Russians.

Energy Minister Megan Woods said New Zealand’s contribution included around 299,000 barrels of diesel held in the UK and around 184,000 barrels of crude oil in Spain.

IEA members are required to hold inventories equivalent to at least 90 days of net oil imports. New Zealand buys and holds offshore emergency reserve stocks.

Cryptocurrencies also eased last week with Bitcoin and Ethereum down 8% to US$42,600 and US$3,200 respectively.

Russia tries to cope with the economic fallout from the invasion of Ukraine

Russia’s central bank cut interest rates last week in a bid to shield the economy from the impact of Western sanctions, saying the ruble’s recent rebound had eased inflationary pressures.

The Bank of Russia announced that it would lower its key rate to 17% from its previous high of 20%. It had more than doubled its borrowing costs by the end of February after Russia invaded Ukraine in a bid to prop up the currency after the United States and Western allies imposed tough sanctions, including a freeze. a large part of its foreign exchange reserves.

The ruble rebounded from a sharp drop immediately after the Feb. 24 invasion following tight controls that limited Russians’ ability to buy foreign currency and prevented foreigners from leaving their investments in Russia. The ruble was trading at around 79 to the dollar on Friday, close to pre-invasion levels.

Economists at the Institute of International Finance have estimated that Russia’s gross domestic product will shrink by 15% this year, wiping out more than a decade and a half of growth.

Coming this week

Monday

  • NZME AGM
  • Electronic card transactions (March) – Stats NZ

Wednesday

  • Reserve Bank Monetary Policy Review
  • Food Price Index (March) – Stats NZ
  • Rental Price Indices (March) – Stats NZ

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