MARKET CLOSE: NZ stocks inch higher as yield comes back into play, Trustpower gains

Tuesday 18th April 2017

New Zealand stocks edged higher as interest in high-yielding stocks including Trustpower and several property companies was offset by some portfolio reshuffling after the Oceania Healthcare initial public offering weighed on stocks such as Ryman Healthcare and Summerset Group.

The S&P/NZX 50 index increased 3.8 points, or 0.05 percent, to 7,233.6. Within the index, 18 stocks fell, 20 rose and 12 were unchanged. Turnover was $114 million.

Stocks across Asia were mixed with Australia's S&P/ASX 200 index down 1.1 percent in afternoon trading while China's Shanghai Stock Exchange Composite Index up 0.2 percent as investors remained nervous about tensions between the US and North Korea. The yield on US 10-year Treasuries has dropped about 35 basis points to 2.25 percent over the past month with investors scaling back their appetite for risk-sensitive assets.

Brad Gordon, investment adviser for Hobson Wealth Partners noted overall trading remained tepid as many investors are jittery, in particular about tensions between the US and North Korea. "I have had conversations with very concerned clients," he said.

Given that US 10-year Treasuries remain well off their highs "I think the yield trade is back on. We are seeing some support coming in for property trusts and other yield plays," said Gordon.

Among those yield plays, Trustpower added 2.4 percent to $4.79. Investors were also cheered late last week when Trustpower said annual earnings were at the higher end of guidance after strong generation, especially in Australia. Controlling shareholder Infratil gained 1.5 percent to $2.99.

Precinct Properties New Zealand added 1.2 percent to $1.225 while Stride Property gained 1.2 percent to $1.75.

Outdoor clothing retailer Kathmandu Holdings led the index higher, rising 3.1 percent to $2.01

Orion Health rose 5.2 percent to $1.41 after news it had signed a $9.3 million five-year contract to license its Amadeus precision medicine platform to Dorset County Council in England. The software developer has had to fend off suggestions its chief executive should step aside over delays in its sales pipeline.

Warehouse Group was unchanged at $2.22 after it said it has entered into an unconditional contract to sell its Newmarket property in Auckland for $65 million and tagged the proceeds to reduce debt.

In the other direction, Ryman Healthcare shed 1.3 percent to $8.54 while Summerset lost 2.8 percent to $5.18. Gordon said the move was likely in the wake of Oceania Healthcare’s bookbuild last week, which came in near the bottom of the range at 79 cents. The aged-care group plans to raise $200 million in the first IPO of the year. Metlifecare declined 0.2 percent to $5.75. There is likely some "portfolio tinkering," Gordon said.

SkyCity Entertainment Group shed 1.1 percent to $4.40 on some profit taking given a recent strong run where it "sort of defied gravity," said Gordon.

Fletcher Building added 0.4 percent to $8.02. Speculation re-emerged Tuesday about a break-up or buyout of Fletcher Building with investment banks said to be working on pitches on the other side of the Tasman, according to an Australian media report.

US Vice President Mike Pence is expected to reassure Japan of American commitment to reining in North Korea's nuclear and missile ambitions on Tuesday, after warning that US strikes in Syria and Afghanistan showed the strength of its resolve, Reuters reported. Pence took off for Tokyo from a US air base south of Seoul, where he assured leaders of the "iron-clad" alliance with the United States. He also warned the reclusive North, which has conducted a series of missile and nuclear tests in defiance of UN sanctions, that the "era of strategic patience" was over.

Gordon said investors will be looking ahead to US data this week that could push US Treasuries around as well as the US earnings season, due to kick off Thursday.

(BusinessDesk)

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