MARKET CLOSE: NZ shares gain as upcoming Fed meeting bolsters yield stocks; Sky TV gains

Wednesday 19th December 2018

New Zealand shares gained on expectations the US Federal Reserve may soften its interest rate outlook for the coming year. Sky Network Television extended its rebound.

The S&P/NZX 50 index rose 73.82 points, or 0.9 percent, to 8,762.19. Within the index, 32 stocks gained, 10 fell and eight were unchanged. Turnover was $148.4 million.

The local market outperformed Asia, where Australia's S&P/ASX 200 index was down 0.3 percent in afternoon trading, Singapore's Straits Times index rose 0.4 percent and Hong Kong's Hang Seng edged up 0.1 percent. Investors are awaiting the Federal Open Market Committee meeting, where chair Jerome Powell is expected to raise the federal funds rate for a fourth time this year, but dial back projections for increases next year.

Volatility in equity markets has been heightened as the Fed started raising interest rates more aggressively, offering investors an alternative to stocks. A decade of near-zero rate policies had diminished the appeal of fixed income assets. New Zealand's market has remained relatively attractive given the high proportion of companies paying high dividends.

"There's a bit of growing optimism the Federal Reserve will come out with a slightly softer tone than last time," said Shane Solly, portfolio manager at Harbour Asset Manager. "We've had a very good day relative to other markets and that's because a lot of our stocks are good, solid, boring utilities."

Among companies typically seen as offering reliable dividends, Kiwi Property Group rose 3.4 percent to $1.385 on modest volumes, Auckland International Airport climbed 2.1 percent to $7.15, Property For Industry increased 2.3 percent to $1.795 in light trading, and Port of Tauranga advanced 1.6 percent to $5.10 in thin trading.

Sky Network Television led the market higher, jumping 8.5 percent to $2.16. The pay-TV operator dropped below $2 earlier this week for the first time since its 2005 merger with Independent News Ltd. The company has traditionally offered a high dividend yield, but cut its first-half return to preserve capital as it contends with new online delivery methods.

Heartland Group rose 4.4 percent to $1.41 on a volume of 588,000 shares, compared to its 90-day average of 377,000. It dropped to a two-year low yesterday as investors weighed up the impact of the Reserve Bank's proposals to impose stricter capital requirements on banks. Today it said it would need to boost its high-quality capital by about $15 million a year during the five-year transition.

Spark New Zealand was the busiest stock, with a volume of 3.9 million. It was unchanged at $4.17. Meridian Energy slipped 0.4 percent to $3.405 on 3.8 million shares trading, more than twice its average volume, while Trade Me Group decreased 0.3 percent to $6.30 on a volume of 3.2 million.

Fletcher Building slipped 1.6 percent to $4.85 on a volume of 2.3 million, compared to its 1.7 million average. The construction company yesterday announced the US$840 million sale of its Formica international business.

Of other companies trading on volumes of more than 1 million shares, Air New Zealand rose 3.1 percent to $3.19 and Argosy Property was up 1.3 percent at $1.195.

Spark, Fletcher, and Kiwi Property were among several companies to note global exchange-traded fund manager Vanguard as a substantial shareholder today. Of the others, Chorus rose 1.1 percent to $4.64 and Fisher & Paykel Healthcare gained 2 percent to $12.50. A2 Milk Co acknowledged an increase in Vanguard's investment. The milk marketing firm increased 0.3 percent to $10.75.

Last week, ASB Bank hired Vanguard as its new investment manager for the Australasian equities of a number of its products, including the ASB KiwiSaver scheme and ASB Investment Funds. ASB is the country's second-biggest KiwiSaver provider.

NZX rose 1 percent to 99 cents. The stock market operator may have locked in at least one initial public offering for 2019 with the Hawke's Bay Regional Council voting to advance a planned partial sale of Napier Port. However, that's offset by SLI Systems suitor ESW Holdings declaring its takeover unconditional after crossing the 90 percent threshold needed to mop-up hold-out shareholders. SLI shares were unchanged at 64 cents, below the 65 cents offered.

(BusinessDesk)

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