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MARKET CLOSE: Xero leads after deal with PayPal founder

Friday 22nd October 2010

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NZ stocks rose to a five-month high as the closure of local markets for Labour Day on Monday spurred investors’ appetite for higher-yielding.

The NZX 50 Index rose 24.83 points, or 0.8%, to 3,289.74 with the market rising to 70.94 on the relative strength index. A rating above 70 on the RSI is a level some technical analysts say means a security is poised to fall. Within the index, 23 stocks rose, nine fell and 18 were unchanged. Turnover was $106.1 million.

Pyne Gould, Steel & Tube and Telecom paced gainers on the day.

“What we’re seeing is that people who previously had not been investing in growth equities are considering it again at the moment,” said Shane Solly, portfolio manager at Mint Asset Investment.

Xero (NZX: XRO ) rose 6% to $1.58 after the company tapped PayPal co-founder Peter Thiel for $4 million to help fast-track its expansion in the US.

Thiel, who helped set up online payments company PayPal and later sold it to eBay for US$1.5 billion, will buy about 2.7 million shares in Xero in a private placement to help support the company’s expansion into the US, giving him about 3% ownership. Once the deal is done, he will join Xero’s US Advisory Board.

Pyne Gould (NZX: PGC ) rose 5% to 42 cents, leading gains on the main board. Steel & Tube (NZX: STH ) rose 3.8% to $2.49, and Telecom (NZX: TEL ) rose 3% to $2.09

Pike River Coal (NZX: PRC ) rose 1% to $1.03 after being heavily sold down after the company cut its production forecast for the year to between 320,000 and 360,000 tonnes of saleable coal from an estimated one million tonnes.

Solly said the stock was now sitting at a level which some investors see as attractive relative to its longer term prospects.

Auckland International Airport (NZX: AIA ) rose 1% to $2.11 after it said it will compromise on lifting its directors' fees, and will stage the 12.2% hike over two years rather than one.

Ebos Group (NZX: EBO ) rose 1% to $7.12 after it announced a special dividend of 20 cents at its annual meeting yesterday.

Allied Farmers (NZX: ALF ) rose 14% to 2.4 cents after reports on Radio New Zealand that the company is looking revive a bid to raise capital.

Yesterday the company repaid its term loan facility with Westpac. The loan stood at $16.5 million at June 30.

NZX (NZX: NZX ) fell 1.9% to $1.55, pacing decliners on the NZX 50.

“Clearly the relatively modest activity in the market does have an impact on NZX’s profit in the shirt-term and that has got to weigh on the stock,” said Solly.

Property for Industry (NZX: PFI ) fell 1.7% to $1.16, SkyCity (NZX: SKC ) fell 0.3% to $2.91, and Fletcher Building (NZX: FBU ) fell 0.1% to $8.20.

Vector (NZX: VCT ) fell 0.4% to $2.36 after it said it is set to test new rights under the Commerce Act to challenge the Commerce Commission’s emerging view about appropriate regulated rates of return for monopolies.

The Commission released its final draft of the so-called “input methodologies” for determining rates of return for regulated monopolies just ahead of Vector’s annual meeting in Auckland. Regulated earnings represent 60% of Vector’s revenue, derived from Auckland isthmus electricity and gas network ownership, with more to come if it’s chosen for the government-funded ultra-fast broadband roll-out.

AMP NZ Office Trust (NZX: APT ) fell 1.3% to 78 cents, a day after investors approved its bid to restructure itself into a company and cut its management fees.

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