Market News 2 June 2026

Johnny Lee writes:

RBNZ

THE Reserve Bank has retained the OCR at 2.25%, with the six votes evenly split between hiking and retaining the current level.

In the event of a tie, the Governor’s vote carries the decision. New Governor Anna Breman voted to keep rates at 2.25%.

This result was broadly expected, with most economists expecting the rate to remain unchanged. Investors should be under no illusions, however. The RBNZ was very clear in its wording, stating “The OCR will most likely need to increase sooner and by more than envisaged in the February statement.”

Virtually every data point has deteriorated over the last three months. Unemployment projections are worse, inflation expectations are higher, and now OCR projections are higher, with the RBNZ expecting a steeper rise to a higher neutral point.

Markets are now pricing three hikes in three meetings, resulting in an OCR of 3.00% by October, with further hikes possible as needed.

Whether oil price strength remains in the long term will be contingent on geopolitical factors well beyond the control of the Reserve Bank of New Zealand. Unfortunately, the story seems to change between ceasefires and bombings week-to-week, making it difficult to predict an outcome.

The RBNZ statement included a cautionary statement regarding artificial intelligence. The RBNZ highlighted the globe’s exposure to AI investment as a key risk, stating that it views US equity markets as “elevated”, and that AI “failing to meet expectations” could lead to downside risk on global growth over the long term.

The share price appreciation seen from the likes of NVIDIA has been a significant driver for US equity markets, with a valuation now approaching five and a half trillion US dollars. Its trajectory will continue to match that of US equity markets in the short term.

For now, we have four more Monetary Policy meetings left in the year – early July, early September, late October and early December. With at least three hikes expected this year, these four events promise to be both eventful and market moving. 

Fisher & Paykel Healthcare 

THE New Zealand market received a significant boost last week after our largest company, Fisher and Paykel Healthcare, published its financial results.

The share price rose 10% on the day, before settling 8% higher. This dragged the index higher, such is the weighting apportioned to FPH.

It was another excellent year for the respiratory care company, with revenue climbing 14% and net profit after tax climbing 24%. 

Hospital revenue has finally eclipsed the very high watermark achieved during the COVID era, with revenue from this division surpassing $1.5 billion.

Homecare also continues to move from strength to strength, as it nears the $1 billion revenue mark. 

The dividend climbed again, rising from 24 cents to 33 cents. The December dividend was 19 cents, making a total of 52 cents for the year, up 22%. The balance sheet remains in rude health, with net cash of over $400 million.

Outlook was positive, with next year’s revenue expected to climb to around $2.5 billion, while net profit is expected to reach $500 million. The company notes that certain uncontrollable factors will weigh unduly on these forecasts, including tariffs, the sea freight market and land valuations.

Fisher and Paykel’s ongoing dominance and leadership in the respiratory sector continues to impress. An ageing population continues to grow its market, and with 88% of its revenue generated from recurring sales and consumables, it is well placed to capture this opportunity in a sustainable way.

Infratil

OUR second largest company reported shortly after.

Infratil’s full-year result also saw double-digit growth, with EBITDAF climbing 11% to $989 million.

The data centre business now faces something of a moment of truth. Infratil is guiding for very significant earnings growth next year, on the back of relentless demand for “compute”.

Infratil went as far as to describe the business as “the opportunity of a lifetime”. With capital expenditure expected to approach $4 billion next year, it is clear that Infratil’s conviction in the sector will lead to the business rapidly becoming a data centre business first and foremost.

The “future build” component of CDC now makes up around 80% of the capacity pipeline, meaning that CDC is only just getting started. With strong counterparties including various Australian Government agencies, cash flows should reliably follow soon after.

Outside of CDC, business continues. Longroad, the renewables development business in the US, saw earnings climb 170% as several projects began contributing to its bottom line. 

Demand for electricity in the US is projected to increase sharply over the next decade, with data centres, electrification and manufacturing driving the increase. Indeed, Longroad is now considering a data centre focused strategy for its business.

The rest of the portfolio was far more tepid.

One NZ’s result was almost flat, with earnings up $4 million to $609 million. While mobile connections grew, this was balanced with rising costs across the business, a familiar story for shareholders of rival Spark.

Wellington Airport saw very modest earnings growth, with a decline in domestic throughput outpaced by cost control and growth in international passenger numbers. Fuel cost pressures were leading to some airlines pulling back their services, causing further short-term pessimism.

Infratil notes that continued weak migration would continue to act as a headwind on both businesses. 

The review for Qscan remains ongoing, with Infratil looking to continue its divestment programme as it looks to simplify its portfolio. Contact Energy may also provide some options for Infratil, with strong market appetite for Contact’s recent placement.

Overall, the portfolio is now worth over $20 billion, up 10%, with CDC driving much of this increase. CDC makes up around $9 billion of this figure, with One NZ worth above $3 billion and Longroad worth north of $2 billion. 

Guidance for next year is for earnings of around $1.3 to $1.4 billion, mostly driven by One NZ and CDC. However, Infratil is also planning to spend billions across its portfolio – primarily on CDC and Longroad – as the company tries to sate the demand for processing power and the energy to fuel it. 

Bond Market

THE bond market has been uncharacteristically quiet this year, with few new offers coming through for investors in the wake of significant geopolitical upheaval and a rapidly evolving interest rate environment.

Issuers, obviously, prefer to borrow when interest rates are low, particularly for long-term funding. The post-COVID environment was a good example of this, with a number of issuers raising long-dated money at rates below 2.5%. Investors then faced the choice of accepting prevailing rates or holding cash or short-dated deposits and hoping for a recovery in interest rates.

Fortunately, this dearth of new issues may be about to improve, with a number of bond issues said to be in the wings. The first of these was announced last week.

Infratil Bond Issue

Infratil has announced a subordinated capital bond issue. The offer is for a 31-year bond, first redeemable after six years. Like the other similar capital bonds on our exchange (such as CEN090), the bond will be priced assuming it will mature after six years on the initial optional redemption date.

The bonds will also be listed on the NZX, allowing investors to exit the investment whenever they would like.

Infratil is to raise $150 million, with the option to accept unlimited oversubscriptions. The bond will carry an investment grade credit rating of BBB-, two notches below Infratil’s own rating (BBB+). This discrepancy is to account for the subordinated nature of the capital bond.

The offer opens today (2 June), with FIRM offers closing at 10am on 5 June. 

These bonds will carry a minimum interest rate of 5.50%.

Investors wishing for a FIRM allocation should contact us as soon as possible with their CSN and amount they wish to invest.

Travel

8 June – Nelson – Chris Lee (FULL)

9 June – Blenheim – Chris Lee (FULL)

30 June – Christchurch – Chris Lee (FULL)

1 July – Christchurch – Chris Lee (FULL)

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