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MARKET CLOSE: NZ stocks rise; Pike River leads gains

Tuesday 6th July 2010

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New Zealand stocks rose for a second straight session, led by Pike River Coal as the takeover offer for Australia’s Centennial Coal prompted investors to rerate the sector, lifting valuations.

The NZX 50 rose 5.05 points, or 0.2%, to 2952.4. Within the index, 20 stocks rose, 15 fell and 15 were unchanged. Turnover was a lower-than-average $44.6 million, reflecting the Independence Day public holiday that closed markets in the US on Monday.

Pike River (NZX: PRC ) rose 4.5% to 93 cents on speculation that the coal sector could expect further consolidation following the announcement yesterday that Banpu, Thailand’s biggest coal producer, had agreed to acquire the rest of Australia’s Centennial Coal for A$2 billion.

Kiwi Income Property Trust (NZX: KPT ), the investor in prime retail and office properties, rose 2.2% to 92 cents.

Kiwi Income “is up on the expected conversion of notes into ordinary shares and the index reweighting,” said Ricky Ward, domestic equities manager for Tyndall Investment Management. “There is also some speculation that KiwiSaver may become an active investor in this sector, which has helped create some appetite for the stock.”

NZX (NZX: NZX ) rose 1.3% to $1.58. The bourse announced today that the value of trading on the NZX had dropped 24% last month, while total trades declined 18%.

Ward said the announcement took out some of the buyer enthusiasm that had been raised yesterday when NZX announced plan to buy back 2.9% of its stock. Shares in PGG Wrightson (NZX: PGW ) rose 4.3% to 49 cents ahead of Fonterra's online milk powder auction, which will provide a clue to the strength of the dairy sector, major clients for the nation’s largest rural services company.

Shares managed to eke out gains even after a survey showed dwindling business confidence in the past three months. The slump in business confidence was matched by an announcement from the Reserve Bank of Australia that it was keeping the official interest rate unchanged at 4.5% as it waits for uncertainties in the global recovery to resolve.

“The survey is just a sign that the market is not as healthy as expected, with quite a bit of apprehension ahead of reporting season,” Tyndall’s Ward said. “I think people are starting to look at the likelihood of the Reserve Bank starting to tighten rates, and so are waiting on the sidelines for the effects that that decision will have on things like retail and consumer stocks.”

Pacing decliners, New Zealand Oil & Gas(NZX: NZO ) fell 3.3% to $1.19, which Ward attributed to a combination of the lower-than-expected production forecast from its 12.5%-owned Tui oilfield and weaker oil prices. Output from the oilfield has been cut by 300,000 barrels because of an extended shut-down at the Pateke-3H well, it said yesterday.

Shares in Michael Hill (NZX: MHI fell 2.9% to 68 cents and Air New Zealand (NZX: AIR ) fell 1.9% to $1.02. Kathmandu (NZX: KMD ) fell 1.5% to $2, Freightways (NZX: FRE ), the transport operator, fell 1.5% to $2.69, and AMP NZ Office Trust (ANZX: APT ) was 1.4% weaker at 70 cents.

Shares in New Image Group (NZX: NEW ), the manufacturer of colostrum-based health tonics, rose 3.2% to 32 cents. The company had earlier announced that sales had dropped 17% last financial year, mainly reflecting the impact of a strong kiwi dollar. This was offset by an expect pick-up in 2011 sales on demand from Asia. Unaudited revenue was $81.7 million in the 12 months through June 30, down from $98.1 million a year earlier, it said.

Irongate Property announced that it will borrow $45 million from investors led by Bluestone Group, allowing it to repay bonds coming due this month. The unprofitable property manager has until tomorrow to file its overdue annual report of risk suspension of its debt securities from the NZX.

Irongate general manager Chris Minty had previously said there was some uncertainty about whether it could make the debt repayment.

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