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MARKET CLOSE: NZ stocks gain; investors seek value ahead of earnings season

Monday 21st January 2019

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New Zealand shares rose as investors picked through mixed local and international economic signals to focus on firms likely to do better in a slowing environment.

The S&P/NZX 50 index rose 50.86 points, or 0.6 percent, to 9,148.57. Within the index, 40 stocks rose, six were unchanged and four fell. Turnover was light at $67.9 million, with much of the country on holiday marking Wellington Anniversary Day.

“There are pretty mixed signals on the economy and I think investors are struggling a little bit to position themselves for the year ahead,” said Grant Williamson, investment advisor at Hamilton Hindin Greene.

“Investors are being pretty selective on what they are buying at the moment,” he said. “Yield and high-growth stocks seem to be on the table.”

Spark New Zealand, up 0.3 percent at $4.05, again led turnover with 3.6 million shares changing hands. That was slightly ahead of the daily average for the past three months.

Second was Trade Me Group, unchanged at $6.33. About 1.8 million shares traded today, almost twice the daily average. Last month the company agreed to a scheme implementation agreement under which UK-based Apax Partners will acquire all its shares at $6.45 apiece, subject to shareholder and court approval and no better offers emerging. A vote is expected in April. 

Stocks in the US had a strong finish to the week on the back of better than expected manufacturing data and optimism China is prepared to cut back its trade deficit with the US. The S&P500 closed 1.3 percent higher.

Asian equity markets rose today. China’s fourth-quarter GDP rose 6.4 percent from a year earlier, as expected, and consistent with recent data signalling a slowdown there. Australia's S&P/ASX200 was up 0.3 percent while Japan's Topix was up 0.6 percent and Hong Kong's Hang Seng was up 0.3 percent. 

Cinema software company Vista Group International was the biggest gainer in the local benchmark index today. Late last year the firm settled new contracts with 123 Odeon Cinemas Group locations in Britain and Ireland. The stock rose 3.1 percent to $4.05.

Port of Tauranga, the country’s largest sea port, posted the biggest decline today. It fell 0.6 percent to $5.12.

Mining junior New Talisman Gold, unchanged at 1.5 cents, was among the few stocks to have more than a million shares traded today.

Williamson said Fletcher Building was back solidly above $5. While the business has had some real issues, it is a stock that historically has bounced back from periods of poor performance, he said.

“There’s probably a bit of bargain-hunting ahead of their results next month,” Williamson said. “There’s got to be some good news coming at some stage.”

Yield stocks like Auckland International Airport and Chorus, and the energy companies, had been performing well in the past week, he said.

Global logistics firm Mainfreight Group, more of a growth story, also continued its recent rally, closing at a new record of $32.20, up 0.8 percent. Fisher &Paykel Healthcare, up 1 percent at $13.99, had also returned to favour, Williamson said.

Auckland Airport was up 1.6 percent at $7.47, while Chorus was up 2.4 percent at $4.935.

Trustpower rose 0.5 percent to $6.22. The country’s fifth-largest power retailer reiterated its March-year guidance. While generation volumes in the nine months through December were down on the year before, average generation prices were 31 percent higher at $117/MWh.

Williamson said investors are now waiting on local earnings for company comment on their outlook for the coming year.

He noted negative data on housing prices had weighed on retirement sector stocks like Ryman Healthcare and Summerset Group. Real Estate Institute of New Zealand data last week showed December sales were the lowest in seven years.

Williamson said the stocks had made some recovery but were still under-performing after the sell-off across the market in October.

Ryman rose 0.1 percent to $11.11; Summerset rose 1.4 percent to $6.42.

Among the smaller players, bar and hospitality operator Veritas Investments jumped 22 percent to 11 cents. Craft brewer McCashin’s has acquired an option to buy almost 20 percent of the company from former chief executive Michael Morton at 20 cents a share.


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