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MARKET CLOSE: NZ shares rise as yield hunt lifts Genesis, Auckland Airport to records

Friday 28th June 2019

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New Zealand shares rose as companies offering reliable dividends remain attractive in the persistently low interest rate environment. Genesis Energy and Auckland International Airport hit records. 

The S&P/NZX 50 Index increased 23.17 points, or 0.2 percent, to 10,431.22. Within the index, 27 stocks rose, 20 fell, and three were unchanged. Turnover was $105.1 million. 

Investors have been taking on equity risk in their hunt for yield over the past 12-18 months as the outlook for global interest rates is for them to stay lower for longer. The yield on 10-year New Zealand government bonds fell as low as 1.535 percent last week and has been in the unusual position of being lower than their US counterpart since April last year. 

That low rate environment has underpinned demand for utilities, infrastructure companies and property firms, many of which have been near all-time highs. Auckland Airport led the market higher today, up 2.2 percent to a record $9.80 on a volume of 1.2 million shares, in line with its 1.3 million 90-day average. 

Genesis Energy rose as high as $3.38, ending the day at $3.31, up 2 percent. Infratil increased 2 percent to $4.64, Precinct Properties New Zealand advanced 1.7 percent to $1.765 and Mercury NZ was rose 1.4 percent to $3.93. 

"It's a continuation of the trend we have seen for a while in yield and property and infrastructure names being well supported," said James Lindsay, a senior portfolio manager at Nikko Asset Management. 

Lindsay said the increase in bond yields in recent days hadn't cooled demand for locally listed income equities. "The sectors continue to perform as they have for the last 12-18 months since the Fed and global rates have fallen to lows." 

Fletcher Building was the most actively traded stock today. It dropped 6.8 percent to $4.93 on a volume of 2.6 million shares, more than twice its average. The country's biggest listed building firm yesterday updated investors about how its new strategy was progressing. It also announced plans for buy back $300 million of stock on-market, and affirmed annual earnings and dividend guidance. 

Lindsay said the composition of earnings was a concern for investors, with weaker margins than expected in the Australian business and extra costs in the New Zealand arm. 

Kiwi Property Group decreased 0.3 percent to $1.62 on a volume of 2.2 million shares, compared to its 1.4 million average, while Spark New Zealand rose 1.3 percent to $3.93 on 2.2 million, less than half its usual 5.2 million. 

Tourism Holdings fell 1.3 percent to $3.75 on an unusually large volume of 1.2 million shares. About 158,000 shares are typically traded in a day. The rental RV operator is raising $50 million in a rights issue at $3.40 a share, with registered stockholders on July 2 able to participate. 

Arvida Group was also unusually active, up 0.7 percent at $1.36 on a volume of 1.8 million shares, compared to its 351,000 average. It's raising $92 million in a rights issue at $1.15 a share. The record date for the issue is July 3. 

Of other stocks trading on volumes of more than a million shares, Chorus decreased 0.9 percent to $5.64, Z Energy increased 0.8 percent to $6.35, and Meridian Energy was up 0.4 percent at $4.80. 

NZX rose 1.8 percent to $1.12 on a smaller volume than normal of 96,000. The stock market operator today got a clean bill of health by the Financial Markets Authority's annual review of its supervision function. 

Outside the benchmark index, TIL Logistics fell 2.2 percent to $1.32 after trimming annual earnings guidance due to earlier relocation costs than expected. The logistics firm also increased its provision for earn-out payments on its Move Logistics acquisition. 

Fonterra Cooperative Group's 2025 bond paying annual interest of 4.15 percent was the day's most traded debt security on a volume of 892,000. The notes closed at a yield of 2.8 percent, up 1 basis point. 


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