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MARKET CLOSE: NZ shares rise as Fonterra Fund recovers

Monday 8th July 2019

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New Zealand shares were led higher by a recovery in Fonterra Shareholders' Fund units after a sharp sell-off yesterday. Utilities and property investors remain in favour among investors wanting a decent yield. 

The S&P/NZX 50 Index rose 57.19 points, or 0.5 percent, to 10,615.47. Within the index, 33 stocks gained, 11 fell and six were unchanged. Turnover was $134.4 million. 

Fonterra fund units led the market higher, up 3.7 percent at $3.68. They bounced back from yesterday's 5.3 percent slide but are still down 20 percent so far this year. Chief financial officer Marc Rivers moved to calm the market, issuing a statement to the stock exchange saying there was nothing new behind the slump. About 395,000 units changed hands, almost twice their 90-day average of 200,000. Fonterra's farmer-owned shares rose 5.1 percent to $3.69 on a volume of 641,000, more than its 163,000 average. 

"They stuck their hand up and said they're not doing as well as they could do, but they're addressing their debt situation, selling assets like Tip Top," said Greg Smith, head of research at Fat Prophets. 

Companies offering reliable income remained in demand, and Smith said that will likely remain a key theme after the Reserve Bank of Australia cut its benchmark interest rate this week, putting pressure on New Zealand's central bank to follow suit. What's more, upcoming US employment data may force the Federal Reserve to cut, adding to the attraction of New Zealand's high-yield stocks. 

Meridian Energy rose 2.7 percent to $4.83 on a volume of 1.1 million shares. Chorus was up 2.2 percent at $5.80, Goodman Property Trust rose 2.1 percent to $1.97, and Genesis Energy climbed 2 percent to $3.50 on a volume of 1.9 million shares, about three times it 610,000 average. 

Smith said the local benchmark - which is at a record and trading at the highest forward price-to-earnings multiple across Asia - can probably run further due to the Reserve Bank of New Zealand's scope to cut interest rates further. 

"The interesting thing is what happens when the RBNZ's lowering rates but also looking to raise bank capital requirements?"

Heartland Group Holdings, whose licensed New Zealand bank division supports the higher capital requirements, rose 1.8 percent to $1.70, while dual-listed Australian & New Zealand Banking Group was up 0.1 percent at $29.60 and Westpac Banking Corp rose 1.2 percent to $29.89. 

Mercury NZ was the most traded stock on a volume of 4.7 million shares, well up on its 672,000 average. It rose 1.7 percent to $4.58. Spark New Zealand increased 0.9 percent to $3.985 on a volume of 4.2 million, while Kiwi Property Group was unchanged at $1.615 on a volume of 2.9 million shares, and Auckland International Airport decreased 0.5 percent to $9.50 on a volume of 2 million shares. 

Among other stocks trading on volumes of more than a million shares, Precinct Properties New Zealand rose 0.9 percent to $1.77 and Arvida Group declined 1.5 percent to $1.36.

Pushpay Holdings fell 3.8 percent to $3.55 on a volume of 496,000 shares. The company came out of a trading halt yesterday from a bookbuild to help founder and former chief executive Chris Heaslip sell down his stake. 

Trustpower shares rose 0.7 percent to $7.50 after confirming a seven-year, $50 million bond offer, with the ability to accept over-subscriptions of up to $25 million. The bonds will pay annual interest of 3.35 percent. 

Chorus's 2028 bond paying annual interest of 4.35 percent was the most traded debt security with a volume of 507,000. The notes closed at a yield of 2.85 percent, up 5 basis points. 


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