MARKET CLOSE: NZ shares gain led by A2 Milk; Xero reaches 3-year high

Monday 31st July 2017

New Zealand shares rose led by A2 Milk amid optimism it will stand to benefit from Chinese efforts to reduce the number of infant formula brands available in its market, while Xero reached a three-year high as investors were drawn back to its growth story.

The S&P/NZX 50 Index rose 54.48 points, or 0.7 percent, to 7,693.99. Within the index, 34 stocks rose, nine fell and seven were unchanged. Turnover was $164 million.

A2 rose 3 percent to $4.41, coming within 11 cents of the record reached last week. In May, the company lifted annual sales guidance for the second time in as many months to reflect Chinese demand. Xero, the cloud-based accounting services company, rose 1.1 percent to $26.38, having reached as high as $26.45 in intraday trading.

"These are examples of where investors have fallen back in love with a couple of the favoured growth stocks," said Greg Smith, head of research at Fat Prophets in Auckland. "With the Chinese trying to reduce the number of brands available to maintain an emphasis on quality, if A2 is one of the brands left standing then that's great for them," he said.

With Xero, "you wouldn't say it was cheap but that's probably never been the case and the market is happy to back a growth story," he said. "It is not without peril in terms of competition in the US but the market continues to be prepared to give them the benefit of the doubt." The stock was at a key area of resistance given it hasn't been higher since 2014 but "if it sails through $26.50, technically we're going back into the $30s."

Auckland International Airport was among gainers today, rising 2.4 percent to $6.96, while Genesis Energy rose 2.1 percent to $2.48, leading gains among energy companies. Mercury NZ rose 2.1 percent to $3.48, Meridian Energy gained 1.6 percent to $2.88. Port of Tauranga rose 1.5 percent to $4.68 and Air New Zealand gained 1.5 percent to $3.35.

CBL Corp rose about 2 percent to $3.63.

The NZX 50 Index has gained 11 percent this year and is currently sitting within 0.5 percent of its record high reached two weeks ago.

Smith said the local bourse is "one of the higher yielding markets in the world" and the Federal Reserve having backed away from aggressive rate increases had been positive not only for US stocks but also the New Zealand market. At the same time, there have been few profit warnings running into the earnings season in August.

Among those that have slashed their guidance, Fletcher Building rose 1.1 percent to $7.99 today.

Arvida Group was the biggest decliner on the day, falling 1.5 percent to $1.29, while Spark New Zealand fell 1.2 percent to $3.75.

(BusinessDesk)

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