MARKET CLOSE: NZ shares back at record highs; Genesis, MetroGlass, A2 gain

Monday 22nd August 2016

New Zealand shares rose, pushing the NZX 50 Index to a new record, as a lack of negative surprises during earnings season ensured ongoing demand for the market's relatively high yields. Genesis Energy, Metro Performance Glass and A2 Milk gained.

The S&P/NZX 50 Index gained 56.91 points, or 0.8 percent, to 7,462.16. Within the index, 28 stocks rose, 15 fell and eight were unchanged. Turnover was $161 million.

The benchmark index has climbed 209 percent from its lows of early 2009 in the depths of global financial crisis. The GFC spurred concerted efforts by central banks to revive economic growth through extraordinary levels of stimulus, including quantitative easing and in the case of Europe and Japan, negative interest rates. In the face of record low interest rates, equity markets shone. On Wall Street, the Standard & Poor's 500 has also recovered from its 2009 lows to reach record highs.

"The path of least resistance has been up," said Greg Smith, head of research at Fat Prophets. "If you look at the lower-for-longer interest rate environment, equities are going to continue to win the beauty prize."

New Zealand has had "a reasonable earnings season" and has an economy that's performing "quite resiliently", especially given the impact of a weak dairy sector and a high kiwi dollar, he said.

Genesis rose 3.9 percent to $2.25, leading the index higher. The company reports on Wednesday and is expected to post a normalised full-year profit of $83.7 million from $81.8 million a year earlier, according to brokerage Forsyth Barr. Meridian Energy, which rose 1 percent to $2.93, also reports on Wednesday and is forecast to post a 12 percent gain in profit to $233.5 million on strong inflows into hydro lakes.

Among other utilities, Mercury NZ gained 1.3 percent to $3.04 ahead of its results tomorrow, and Vector rose 1.2 percent to $3.53 before its results on Wednesday.

MetroGlass, which is on a March 31 financial year, rose 3.5 percent to $2.08. Ryman Healthcare gained 2.8 percent to $9.66 and Metlifecare, which reports Wednesday, gained 1.7 percent to $6.04.

A2 Milk rose 2.8 percent to $2.24. In June the milk marketing company raised its guidance for full-year sales and earnings, with operating earnings before interest, tax, depreciation and amortisation projected to be $52 million to $54 million.

"It's one of the stocks that opinion has been quite divided on, but it is back to its former highs," Smith said.

Spark New Zealand rose 2.6 percent to $4, a 10-year high. Last week the company reported a 1.3 percent drop in annual profit but announced a special dividend on top of its regular payment and promised a further special dividend in 2017.

"Spark has strong yield appeal," Smith said.

GeoOp fell 3.6 percent to 27 cents after the human resources software developer said director Mark Weldon would leave the board at the end of the month to be replaced by an Australian director. Weldon handed over the chairmanship of GeoOp as part of a merger with Australia’s InterfaceIT in April, having led the board through a $10 million private offering ahead of its compliance listing on the NZAX.

Heartland Bank rose 2.7 percent to $1.54. Last week the lender posted a 12 percent gain in annual profit and announced a bigger dividend after benefitting from low interest rates, which gave it access to cheaper funding.

Fletcher Building climbed 1.5 percent to $10.53 and Kathmandu Holdings rose 1.5 percent to $2.03.

Sky Network Television, which reports on Friday, was the biggest decliner today, dropping 2.3 percent to $4.77. The pay-TV company gave guidance at the time it announced its merger proposal with Vodafone New Zealand in June and is expected to report profit before one-time items of about $150 million, down 13 percent from a year earlier.

BusinessDesk.co.nz

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