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MARKET CLOSE: NZ share rise on Reserve Bank cut, Tower, SkyCity, Westpac gain

Thursday 10th March 2016

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New Zealand shares rose, driving the NZX 50 Index to a fresh record, after the central bank unexpectedly cut interest rates to underpin an economy with little inflation. Tower, SkyCity Entertainment Group, Westpac Banking Corp and Fisher & Paykel Healthcare gained.

The S&P/NZX 50 Index rose 51 points, or 0.8 percent, to 6,508.28. Within the index, 33 stocks rose, 13 fell and four were unchanged. Turnover was $201 million.

Reserve Bank governor Graeme Wheeler cut the official cash rate a quarter-point to a record low 2.25 percent and hinted at a further cut. The kiwi dollar tumbled after the unexpected move, helping companies that earn most of their revenue offshore, such as Fisher & Paykel Healthcare, which rose 1.3 percent to a record $9.17.

"The unanticipated cut has certainly gotten people excited," said Shane Solly, director at Harbour Asset Management. "You do have to raise the question mark that cuts in the interest rate are generally associated with a slower level of economic activity, but for the vast majority of companies in the New Zealand stock market they actually benefit from the movements in the currency. This has given the market a bit of a kick along."

Tower led the index, up 3.6 percent to $1.75, with SkyCity Entertainment Group gaining 3.3 percent to $4.70. Mainfreight rose 2.9 percent to $15.84.

Dual listed banks gained as the kiwi weakened against the Australian dollar. Westpac Banking Corp advanced 2.8 percent to $36.70, while Australia & New Zealand Banking Group gained 2.5 percent to $28.80. 

"They've had a good rally on the day, that's more about the Australian market but certainly the currency movement has boosted their returns," Solly said. "The movement in the New Zealand dollar against the Australian dollar has been quite significant."

Restaurant Brands gained 2.6 percent to $4.67. Its annual sales rose almost 8 percent to $387.6 million, led by KFC, Carl's Jr. and Starbucks, while revenue from Pizza Hut fell.

Summerset Group climbed 2.4 percent to $4.25, while Kathmandu Holdings grew 1.9 percent to $1.64.

The market's rise today came despite a slew of companies going ex-dividend. Steel & Tube Holdings, which today gave up rights to a 9 cents-per-share dividend, dropped 5.9 percent, or 14 cents, to $2.23. 

"A number of dividends have been paid across the market," Solly said. " If you allow for them, the market's actually in pretty good order, and it does put a lot of cash back in the hands of investors and that's put a bit of cash back in the system. In a general sense, it would be reasonable to expect things like Tegel to come back to the market. It may be a good time for such potential listings to be coming to the market, with sentiment turning to somewhat positive."

Private equity firm Affinity Equity Partners hired Goldman Sachs and Deutsche Bank last August to advise on a potential share sale for Tegel Foods, which could see the business floated on the NZX and value the New Zealand poultry business at about $800 million.

Air New Zealand, which will pay a 10 cents per share dividend on March 18, dropped 2.2 percent, or 6.5 cents, to $2.835. Ebos Group, which gave up rights to an interim dividend of 26 cents, dropped 0.7 percent to $16.56. 

Trade Me Group shed 1.4 percent to $4.30, after giving up rights to a 7.8 cents dividend. Port of Tauranga dropped 0.7 percent to $18.57, and will pay 23 cents per share on March 24. Mighty River Power dipped 0.2 percent to $2.675, with a 5.7 cents dividend payable on March 31. 

Metlifecare rose 1.1 percent to $4.75, despite giving up rights to its 1.75 cents dividend. Sky TV was unchanged at $4.55, and will pay out 15 cents per share on March 18.

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