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MARKET CLOSE: NZ shares follows Wall St higher as earnings mixed; Xero, Trade Me, Meridian gain

Tuesday 23rd February 2016

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New Zealand shares followed Wall Street higher, as uneven local earnings sent mixed signals to investors. Xero, Trade Me Group and Meridian Energy gained, while Mighty River Power fell. 

The S&P/NZX 50 Index advanced 36.2 points, or 0.6 percent, to 6,175.67. Within the index, 28 stocks rose, 13 fell and nine were unchanged. Turnover was $162 million.

Stocks across Asia were mixed, with China's Shanghai Composite index down 1.3 percent in afternoon trading as financial stocks dropped after the central bank weakened the yuan the most in six weeks. That followed an upbeat trading session on Wall Street and in Europe, where investors were buoyed by higher oil prices. 

Grant Williamson, director at Hamilton Hindin Greene, said the local market was taking its cues from overseas, as the local company earnings season provided a mixture of good and bad results. 

"It's nice to see a continuation in a pickup of the market after what has been a pretty terrible start to 2016," Williamson said. "We're still following offshore to some degree, because reporting season has been so mixed and I don't think there's too much for investors to get their teeth into. Having said that, we've got Australia down today and we're still firm."

Tech stock Xero, which has attracted funding from US investors, led the local index today, rising 3.7 percent to $15.25. That's a two-week high for the stock, which has shed 26 percent so far this year as global equities have floundered amid low oil prices and nervousness about the potential for negative inflation.

Trade Me Group gained 3.6 percent to $4.34.

Energy stocks advanced, with Meridian Energy up 2.2 percent to $2.34, Chorus rising 1.5 percent to $3.95 and Z Energy gaining 1.1 percent to $6.26. In a low interest environment, investors are still looking for dividend income, and energy stocks are a reliable source, Williamson said.

Spark New Zealand rose 2.1 percent to $3.37. The shares have risen 5.1 percent since the company's first half earnings last Thursday, with the company paying a special dividend this year, and announcing it wants to keep paying them in 2017.

NZX gained 2 percent to $1.01 ahead of their full year earnings tomorrow morning. Ebos Group, whose earnings are also due tomorrow, rallied 1.9 percent to $13.70.

After rallying as high as $1.25 at market open, Heartland Bank ended the day unchanged at $1.15. The NZX-listed lender hiked its interim dividend payment following an 8.9 percent lift in first-half profit, as increased auto loans and reverse mortgages bolstered its household lending division.

"They had a nice jump straight after their announcement, but as investors and analysts drilled down a little bit it wasn't as good as they were expecting," Williamson said. "A lot of investors are only looking at the headline announcement, and it does take time to look through at some detail. That normally is when analysts start to advise investors on what they think of it, and that can be a bit of a turning point. A number of investors do jump early, on expectations it will keep on going, but that doesn't always happen."

Orion Health Group was the worst performer, dropping 2.2 percent to $2.64.

Freightways, which fell 2.7 percent yesterday, lost another 2.1 percent today to $5.95, a three-month low. On Monday, the courier and logistics business posted a 5.5 percent gain in first-half profit on strong earnings from its information management division in New Zealand and Australia, but warned conditions will be challenging in the second half.

"The growth rate and forward outlook disappointed the market a little bit, and we've got investors deciding to take a little bit of profit there," Williamson said.

Mighty River Power dropped 1.5 percent to $2.61. The Auckland-based electricity generator and retailer announced a recovery in net profit for the six months to Dec. 31 to $74 million from $8 million in the same period last year, as impairments created by withdrawal from international operations fell. Earnings before internet, tax, depreciation, amortisation and movements in the fair value of financial instruments guidance for the year was lowered and total dividend guidance remained unchanged for the full financial year at 14.3 cents.

Dual-listed stocks fell, with a2 Milk Co down 1.1 percent to $1.80, Westpac Banking Corp losing 0.7 percent to $32.07, and Australia & New Zealand Banking Group dropping 0.5 percent to $25.08.

Outside the benchmark, Fliway Group gained 3.8 percent to a record $1.10. The listed transport and logistics group increased first-half profit 60 percent as a reduction in costs offset weaker revenue. 

"It beat forecast and its guidance, which it announced not that long ago," Williamson said. "The market liked that but it's a pretty small, illiquid stock. It's still short of its issue price; I don't quite know what a stock has to do to get above that issue price."

Tourism Holdings dropped 2.4 percent to $2.48. The campervan rental company boosted first-half profit 45 percent and upgraded its full-year profit forecast, as the sector sits in a sweet spot with a weaker kiwi dollar and cheaper oil supporting international travel.

Wynyard Group has extended its trading halt until tomorrow in order to finalise details of a planned capital raise. Separately, the software developer reported a doubling of its annual loss to $44.1 million in calendar 2015, with revenue largely static at $26.3 million. The shares last traded at $1.54.

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