MARKET CLOSE: NZ stocks edge up to new high, led by Freightways climbs on upbeat trading update

Thursday 29th October 2015

The S&P/NZX 50 Index edged up to a fresh record, led by Freightways on an upbeat trading update. MightyRiverPower and Argosy Property gained on demand for income-paying investments.

The NZX 50 rose 3.39 points, or 0.1 percent, to 6002.380, the second time it broke new highs this week. Within the index stocks were mixed as 19 rose, 20 fell and 11 were unchanged. Turnover was $194 million.

Freightways led the benchmark index higher up 2.3 percent to $5.89. The logistics and courier company reported a 10 percent increase in operating revenue to $127 million in the three months ended Sept. 30, once five extra trading days were excluded. Net profit rose 13 percent $13.5 million. Transport and logistics group Mainfreight climbed 1.3 percent to $15.50 on the upbeat sentiment for the sector.

The benchmark index's run of 13 gains in 14 days has been bolstered by investor demand for investments paying regular income in a low interest rate environment. Today, Reserve Bank Governor Graeme Wheeler kept the official cash rate at 2.75, saying there was room for more cuts and signalling he wanted to see the currency fall further. This kept demand in for yield paying equities, but saw offshore investors sell their kiwi stocks to avoid any further depreciation in the currency.

"It's a given there's a very strong inverse relationship between interest rates and the share market," said James Smalley, director at Hamilton Hindin Greene. "The market had pretty much priced in, certainly from an equity market perspective, both the decision of the Reserve Bank and his comments and that's why we're seeing a bit of a flat market here.

"There's a bit of foreign money flowing out of the country because as a currency falls you tend to get foreign investors selling out to try and get ahead of any future drops in the currency."

Blue-chip stocks were mixed. MRP rose 0.9 percent to $2.83. Genesis Energy fell 0.3 percent to $1.89. Contact Energy gained 0.4 percent to $5.15. Auckland International Airport fell 1.5 percent to $5.30. Argosy Property advanced 0.5 percent to $1.125.

Ebos fell 2.2 percent to $13.55. Long-serving directors Barry Wallace and Peter Kraus sold 4.5 million shares for a total $66.5 million, reducing their collective stake below the 5 percent threshold deemed a substantial shareholder, according to a notice lodged with the NZX. Kraus has been on the board since 1993 and at one stage held about half the company but has watered down his stake over the past 25 years. Wallace joined the board in 2001 and was this week re-elected for another term. Ebos stock last week touched a record $14.05 and has advanced some 41 percent since the start of the year.

"To move that volume in a stock that is as illiquid as Ebos he had to do that at a major discount," Smalley said. "Some investors with deep pockets, presumably a fund or so, was willing to put that amount of money into the stock. You'd have to wonder about Kraus's position on the board long-term because he was obviously there because of the shareholding."

Skellerup Holdings was the worst performer on the benchmark index, down 3.9 percent to $1.50, as investors booked profit after yesterday's 7.6 percent gain when the rubber goods firm, expects annual profit to grow as much as 19 percent as its investment in the US market begins to deliver returns and insulates it from weakness in the dairy industry.

Outside the benchmark index, Turners rose 1.9 percent to 27 cents. The company formerly known as Dorchester Pacific has built up a 7.6 percent stake in Motor Trade Finances and is in talks with other shareholders after its offer to buy up to a fifth of the auto-lender closed earlier this month without yielding a blocking stake against a rival bid.

BusinessDesk.co.nz

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