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MARKET CLOSE: NZ shares rise as threat of US rate cut keeps yield in demand; Fonterra sinks

Friday 5th July 2019

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New Zealand shares rose as the prospect of the Federal Reserve cutting interest rates underpinned demand for companies offering reliable income such as utilities, infrastructure firms and property investors. Fonterra shares and fund units dropped. 

The S&P/NZX 50 Index increased 13.85 points, or 0.1 percent, to 10,558.28. Within the index, 25 stocks rose, 18 fell, and seven were unchanged. Turnover was $147 million, of which Pushpay Holdings accounted for $61.9 million. 

Stocks offering better returns from dividends than those available from bank deposits and bonds continued to attract support after US economic data overnight raised expectations for the Fed to cut interest rates. 

Rickey Ward, New Zealand equity manager at JBWere, said if the Fed cuts interest rates, that adds pressure to other central banks to follow suit to avoid the impact on their currencies and following inflationary effects. 

"Property stocks have had an unbelievable run, not on any brilliant news, but because they provide dividend yield and have a great degree of certainty around that," he said. 

Mercury NZ rose 1 percent to $4.505, Genesis Energy increased 0.9 percent to $3.43, Z Energy was up 1 percent at $6.31, and Vector advanced 0.8 percent to $3.82. Argosy Property rose 0.7 percent to $1.42, Meridian Energy increased 0.6 percent to $4.70 and Chorus was up 0.6 percent at $5.675. 

Stride Property decreased 0.4 percent to $2.24 on a volume of 1.4 million shares, more than its 90-day average of 256,000 shares, and Precinct Properties New Zealand was up 0.3 percent at $1.755 on a volume of 1.2 million, more than its 952,000 average.

Retirement village operators led the market higher, with Ryman Healthcare up 2.9 percent at $12.27 on 447,000 shares, in line with its 90-day average of 451,000 shares. Metlifecare increased 1.6 percent to $4.44, Arvida Group rose 1.5 percent to $1.38 and Summerset Group was up 1.3 percent at $5.69. 

Pushpay was the most traded stock once a halt was lifted, with 16.7 million shares changing hands, compared to its 523,000 average. Former chief executive Chris Heaslip sold 12.2 million shares in an underwritten bookbuild yesterday at a clearing price of $3.70. The stock was halted for the bookbuild, and ended today at $3.69, down 2.6 percent. 

Spark New Zealand fell 1 percent to $3.95 on a volume of 1.5 million shares, well down on its 5 million average. 

A2 Milk decreased 0.8 percent to $14.95 on a volume of 1 million shares. 

Ward said a recent analyst's report suggested the company was going to over-deliver on investor expectations when it reports annual earnings in August, which it's often done in the past. He said the stock is often more volatile in the wake of its earnings result as some investors build short positions. The ASX's daily gross short sales report showed about 1.2 million of A2 shares were reported as sold short, or about 0.2 percent of its stock. 

Synlait Milk, which produces A2's infant formula, rose 2.2 percent to $9.25. 

New Zealand's dominant dairy company didn't fare so well, Fonterra Cooperative Group's farmer-owned shares dropped 6.4 percent to $3.51 on a volume of 529,000, compared to its 163,000 average. Fonterra Shareholders' Fund units posted the biggest decline on the NZX50, down 5.3 percent at $3.55 on a volume of 416,000, more than twice its 197,000 average. 

Ward said a lot of investors have "washed their hands of Fonterra" over the way it subordinated unitholders' interests to those of the cooperative's shareholders, having promoted it as a reliable income stock when the fund was listed in 2012. 

Outside the benchmark index, PGG Wrightson increased 1.9 percent to 54 cents after issuing a notice of meeting where shareholders will be asked to back a court-approved scheme of arrangement to allow a 31 cent per share capital distribution. 

Trustpower's 2029 bond paying annual interest of 3.97 percent was the most traded debt security on a volume of 961,000 notes. It closed at a yield of 3.15 percent, up 5 basis points. Trustpower shares increased 0.3 percent to $7.45, for a dividend yield of 6.36 percent. 


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