MARKET CLOSE: NZ shares rise ahead of Fed; ANZ, Westpac gain; Fonterra up on milk price rebound

Wednesday 16th September 2015

New Zealand shares rose, following Australia's benchmark index higher, as stronger offshore sentiment flowed onto the local bourse. Australia New Zealand Banking Group and Air New Zealand gained. Fonterra Shareholders' Fund advanced after global milk prices extended their rebound.

The S&P/NZX 50 Index rose 18.88 points, or 0.3 percent, to 5667.97. Within the index, 21 stocks rose, 16 fell and 13 were unchanged. Turnover was $124 million.

Overnight, Wall Street rose after better-than-expected retail sales in the US. Australia followed suit with the S&P/ASX 200 Index advancing 1.5 percent in afternoon trading. The outlook for global equity markets is mixed, with investors, analysts and economists divided about whether the US Federal Reserve will lift rates this week, underpinned by concern about China’s struggle to stoke economic growth and its stock market rout.

"There was a strong relief rally from the US - but all eyes are on the Fed decision this week," said Matthew Goodson, managing director at Salt Funds Management. "There are lots of strongly held opinions both ways. The observation I'd make is if they do move, generally the first rate hike or two tends to be taken positively by the equity market given it is a signal of an improving economy."

Dual-listed stocks advanced, with ANZ leading the benchmark index higher, up 2.1 percent to $31.35. Air NZ, the national carrier, gained 1.7 percent to $2.44. Fisher & Paykel Healthcare rose 2 percent to $7.65. Auckland International Airport, the nation's gateway, advanced 1.9 percent to $4.88. Westpac Banking Corp increased 1.6 percent to $34.80.

Prices rose more than expected in the latest GlobalDairyTrade auction in the early hours of the morning, stoking speculation Fonterra Cooperative Group may lift its forecast milk payout from a decade-low. Fonterra Shareholders' Fund, which give investors access to the cooperative's dividend stream, advanced 1.2 percent to $4.98.

"It's certainly seen a response in Fonterra's share price, even though it's a contra indicator it seems to be used as a proxy," Goodson said. "It's from very low levels. To expect a sharp continued retracement in milk prices would perhaps be brave. The other question is clearly Fonterra has withheld significant volume from these auctions, now it is in the low season, but the real test will be when you start getting the spring flush production."

Spark New Zealand, telecommunications provider, fell 0.8 percent to $3.235.

Freightways, the logistics and courier firm, was the worst performer on the benchmark index down 2.8 percent to $5.30.

Outside the benchmark index, Turners, the financial services firm formerly known as Dorchester Pacific, rose 1.7 percent to 29.5 cents after it said it will probably beat annual earnings guidance, though headwinds facing the economy mean it's too early to upgrade the forecast. Chief executive Paul Byrnes told shareholders in Auckland the company is expected to lift first-half earnings 70 percent to $9.5 million and will probably exceed the May forecast for pretax profit of $20 million in the 12 months ending March 31, 2016, though it was still too early to formally upgrade guidance.

On the New Zealand Alternative Index, Snakk Media advanced 2 percent to 5 cents. The mobile advertisement developer plans to tap investors for $2 million and shift over to the fledgling NXT market from the NZAX.

BusinessDesk.co.nz

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