Stocks have biggest jump in six months

By Paul McBeth

Tuesday 24th March 2009

The NZX 50 index had its biggest jump since October 14, extending a global rally on optimism the Obama administration's plan to acquire up to US$1 trillion of toxic assets from banks may help lift the US economy out of recession and revive global growth. The New Zealand dollar climbed 1% on the news.

The NZX 50 rose 79.27, or 3.1%, to 2670.70 in midday trading. Gaining stocks outnumbered decliners by 44 to one, with five unchanged. Turnover was $50.6 million. Nuplex Industries, a specialty chemicals maker, rose 21% to 64 cents as the stronger New Zealand dollar pushed down the value of its overseas debt. Fisher & Paykel Appliances, the whiteware manufacturer which may have to raise more share capital as the value of overseas debt rises, jumped 8.1% to 40 cents.

The New Zealand dollar has gained 16% to 57.10 US cents in the past two weeks. Australian banks rallied as their US counterparts led the charge on Wall Street, with Westpac Banking Group climbing 4.4% to $24 on the NZX, ANZ Banking Group gaining 5.7% to $19.45, and insurer AMP Ltd. increasing 7.6% to $5.80.

The US government's decision to effectively inject US$1 trillion into its economy saw a surge in US stocks, with the Dow Jones Industrial Average rocketing up 6.8%, led by Bank of America up 26%, JPMorgan Chase gaining 25.7%, and Citigroup rising 19.5%.

"It's been a pretty positive response on the back of the finance sector; the sale of toxic assets has the effect of recapitalising the banks," said Bryon Bourke, head equities trader at ABN AMRO Craigs. "We're not out of the woods yet - we're still in a bear market rally," but equities would have a long way to fall to reach a new bottom, he said.

Fletcher Building, New Zealand's largest construction company, rose 5.4% to $6.43 on optimism it stands to benefit from government spending on highways and associated infrastructure. An unexpected gain in sales of existing US homes last month also buoyed sentiment for the company that owns the US-based Formica laminates business.

Steel and Tube Holdings, the maker of steel building supplies, rose 4.2% to $2.72.

Mainfreight, the nation's biggest trucking firm, rose 6.9% to $4.18. Rakon the navigation components maker that gets sales in the US and Europe, climbed 5.8% to $1.28.

Guinness Peat Group, which owns the Coates threadmaker business in Europe, rose 5.5% to 77 cents.

Sanford, the largest fishing company on the NZX 50, was the only stock to fall, dropping 0.7% to $5.70, as the stronger currency erodes the value of export revenue.

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