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MARKET CLOSE: NZX50 at new record as global equities rise

Monday 25th July 2016

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New Zealand shares followed rising global markets to hit a new record, with Xero, Trade Me Group and Kathmandu Holdings leading the index.

The S&P/NZX 50 Index rose 91.25 points, or 1.3 percent, to 7,317.3. Within the index 43 stocks rose, four fell and four were unchanged. Turnover was $126.9 million.

"You've had very strong markets globally over the last couple of weeks - there was the EU referendum volatility, but then you've had a couple of weeks up 30, 40, 50 basis points across a number of markets, and New Zealand has benefitted from that broader trend," said Nick Dravitzki, equity analyst at Devon Funds Management.

Xero led the index, up 4.2 percent to $19.95. The shares have gained 9.8 percent since last Wednesday, when chief executive Rod Drury told shareholders at the annual meeting in Sydney that the software-as-a-service company is in the process of migrating its core platform to Amazon Web Services, reducing costs and paving the way for the company to expand its product range into front-office services.

"The story they articulate hasn't really changed for a long time, but from an investor's point of view, what has changed a little bit is they've started talking about not needing to raise any more capital, generating enough cash to sustain their growth, and he reiterated those comments last week, which has probably been a big driver," Dravitzki said.

Trade Me Group rose 3.1 percent to $5.39, and has advanced 25.5 percent this year.

"That's had a really strong run over the last couple of weeks. It's probably a reflection of people starting to factor in the underlying business actually growing its earnings for the first time in some time as its costs growth winds down. If that continues that will generate some material earnings growth," Dravitzki said. 

Genesis Energy gained 3 percent to $2.22 while Chorus rose 2.3 percent to $4.45.

Kathmandu Holdings advanced 2.9 percent to $1.80. At the end of June, the outdoor equipment chain raised its forecast for annual earnings as it boosts margins from new products, better management of promotional activity and cost savings. The shares have gained 35 percent since then.

"People have gone through their numbers and decided that actually they were too cheap," Dravitzki said. "The market was concerned because the weather was very warm, there were concerns they were going to have a bad winter because of that, but ever since that upgrade it's kept on climbing higher."

Z Energy gained 1.4 percent to $8.52. The company has warned investors that it expects earnings to be $5 million lower due to Caltex's deal with AA Smartfuel. 

In a statement published to the NZX this afternoon, Z said that after it had completed due diligence but before the sale was completed, Caltex renewed its AA Smartfuel contract. Details of the contract aren't being disclosed, but it will hit profit between calendar 2015 and 2016.

A2 Milk Co was the worst performer, down 1 percent to $1.99, while Investore Property dropped 0.6 percent to $1.66.

Outside the main index, Augusta Capital rose 0.9 percent to $1.12. Shareholders overwhelmingly backed the sale of its Finance Centre properties in central Auckland for $96 million at a special meeting to consider the deal.

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