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MARKET CLOSE: NZ shares climb as rate cut stokes demand for yield stocks; Mercury gains

Thursday 8th August 2019

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New Zealand shares gained after the Reserve Bank's unexpectedly large interest rate cut revived demand for yield stocks, boosting the likes of Mercury NZ to a record. 

The S&P/NZX 50 Index advanced 199.09 points, or 1.9 percent, to 10,786.26, recovering all of yesterday's sharp sell-off. Within the index, 45 stocks rose, three fell, and two were unchanged. Turnover was $151.8 million. 

The local market jumped after the Reserve Bank cut the official cash rate by 50 basis points to a record low 1 percent, providing more stimulus earlier than economists had anticipated. Asian markets were mixed following Wall Street's recovery overnight as investors remained nervous about the escalating trade tensions between China and the US. Hong Kong's Hang Seng fell 0.3 percent in afternoon trading, while Australia's S&P/ASX 200 Index was up 0.7 percent and South Korea's Kospi 200 decreased 0.2 percent. 

"After a bit of a rough day yesterday, the market recovered last night and the Reserve Bank came to the party today," said Grant Davies, an investment advisor at Hamilton Hindin Greene. 

"The usual suspects took off today - Mercury, in particular, is a favourite, but going down the list it's all those dividend yield stocks and property stocks too." 

Mercury, which closed at a dividend yield of 3.23 percent, led the market higher, up 5.6 percent at a record $4.94. About 982,000 shares changed hands, more than its 90-day average of 607,000. Chorus, which closed at a dividend yield of 4.13 percent, rose 4.7 percent to $5.62, and Contact Energy advanced 3.1 percent to $7.92 on a volume of 1.2 million shares. It closed at a dividend yield of 4.5 percent. 

Air New Zealand rose 2.3 percent to $9.50 after Jarden analysts raised their target price on the stock by 10 cents to $2.70, saying the airline's solid dividend yield - 8.06 percent - will continue to support the share price over the medium term. 

Vital Healthcare, which reports tomorrow, was up 1.2 percent at $2.605, Precinct Properties New Zealand advanced 2.3 percent to $1.795 on a volume of 1.9 million shares, and Argosy Property increased 1.1 percent to $1.41, on a volume of 2 million shares, more than twice its average of 653,000. 

Spark New Zealand was the most traded stock on a volume of 4.7 million, more than its 3 million average. It rose 3.5 percent to $4.12. Infratil, which took a 49 percent stake in Vodafone New Zealand last week, increased 2.8 percent to $4.75 with 1.2 million shares changing hands. 

Of other stocks trading on volumes of more than a million shares, Meridian Energy was up 3.4 percent at $4.84, Oceania Healthcare advanced 1 percent to $1.03, Ryman Healthcare increased 2.3 percent to $13.30, Arvida Group rose 2.2 percent to $1.37 and Fletcher Building was up 0.4 percent at $4.74. Kiwi Property Group rose 1.6 percent to $1.63 and Goodman Property Trust was up 1 percent at $2.08. 

Fonterra Shareholders' Fund units increased 0.8 percent to $3.78, and Fonterra Cooperative Group's farmer-owned shares rose 1.3 percent to $3.79 after the dairy exporter said it couldn't find a buyer for its entire stake in Beingmate Baby & Child Food, and may sell the shares on market in Shenzhen. 

Exporters also benefited from a slump in the kiwi dollar after the Reserve Bank cut the OCR. Sanford rose 2.4 percent to $6.90, Ebos Group increased 1.9 percent to $24.31, Gentrack advanced 1.6 percent to $5.23 and Fisher & Paykel Healthcare was up 1.3 percent at $16. 

A2 Milk, which often drives the benchmark index's direction, edged up 0.1 percent to $16.57, while Synlait Milk increased 0.6 percent to $9.38. 

Cinema analytics developer Vista Group International was the day's worst-performing stock, down 2.7 percent at $5.50 on a volume of 380,000 shares, in line with its 337,000 average. Pushpay Holdings decreased 1.2 percent to $3.21. 

Mercury's 2049 capital bond paying annual interest of 3.6 percent was the most traded debt security on a volume of 850,000. The notes closed at a yield of 2.75 percent, down 15 basis points. 


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