MARKET CLOSE: NZ shares rise as A2 Milk lifts guidance, Spark bounces back

Wednesday 15th June 2016

New Zealand shares rose as A2 Milk Co raised its guidance and Spark continued to bounce back after being sold off on concerns about a Sky Network Television-Vodafone merger.

The S&P/NZX 50 Index advanced 34.6 points, or 0.5 percent, to 6,869.56. Within the index, 23 stocks rose, 20 fell and seven were unchanged. Turnover was $186.2 million.

A2 Milk led the index, rising 12.7 percent to $1.77, a one-month high, after the milk marketing company raised its full-year guidance and said it is well placed to cope with changes to infant formula regulations in China. A2's revenue is now forecast to be in a range of $350 million to $360 million in the year ending June 30, from a previous forecast of $335 million to $350 million, the company said today.

Michael De Cesare, an analyst at Nikko Asset Management New Zealand, said investor concerns about the regulatory regime in China had weighed on the stock.

"The market as a whole has been struggling with what seems to be a great long-term story caveated with quite complex and ever-changing regulation coming out of China in terms of food standard specifications and how that might impact on Australasian exporters of infant formula," De Cesare said.

Peter McIntyre, investment adviser at Craigs Investment Partners, said strong volume trading in the stock today was confirmation that A2's story was intact, although continued global fears about the UK's upcoming European Union membership referendum could constrain its gains.

"When you get situations like this institutions are quite quick to take money off the table to de-risk portfolios and this is what we've seen in the last few days," McIntyre said.

Equity market gains this afternoon, excluding Australia, could be ascribed to futures markets pointing to a stronger opening in Europe and the US, and confidence that the European Central Bank would act to head off a liquidity crisis in the case of a yes vote, or Brexit, McIntyre said.

At 5:30 pm New Zealand time, Japan's Nikkei 225 was up 0.5 percent and China's SSEC had gained 1.4 percent while Australia's S&P/ASX 200 was down 0.7 percent.

Spark gained 3.1 percent to $3.51. It dropped sharply last week when Sky TV and Vodafone New Zealand announced merger plans but continued to bounce back today. Sky TV rose 1.2 percent to $4.99.

Kathmandu Holdings advanced 2.8 percent to $1.48, Orion Health Group rose 2.4 percent to $4.71, and Fisher & Paykel Healthcare was up 2.3 percent to $10.43.

Air New Zealand gained 1.9 percent to $2.12.The airline will take part in Virgin Australia's planned A$852 million rights issue, even though it plans to offload the bulk of its stake to China's Nanshan Group. If Air NZ hasn't completed the sale of its Virgin stake to Nanshan, it has agreed to pick up Nanshan's share of the entitlement offer.

NZX was the worst performer, dropping 2 percent to $1. NZX is in the middle of an eleven-week trial in Wellington's High Court over a dispute about its purchase of the Clear Grain Exchange in 2009. Last month, NZX's chief executive Tim Bennett said the stock market operator's total legal cost will amount to between $9 million and $10 million by the end of the trial, not including the time spent by internal staff in running the litigation. NZX spent $2 million on the litigation in the 2015 financial year, and Bennett said it would have been in both parties' interests to settle the dispute before trial.

Meridian Energy shed 2 percent to $2.51, Auckland International Airport dropped 1.7 percent to $6.29, and Tower fell 1.7 percent to $1.45.

Outside the main index, Augusta Capital declined 0.9 percent to $1.105. The listed property investor and fund manager has sold its Auckland Finance Centre for $96 million, dependent on shareholder approval.

BusinessDesk.co.nz

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