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MARKET CLOSE: NZX50 at record, stocks like Trustpower, Mercury bolstered by softer CPI

Tuesday 18th July 2017

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New Zealand shares hit a record as weaker CPI numbers bolstered shares, with dividend stocks like Mercury New Zealand and Trustpower benefiting.

The S&P/NZX50 Index gained 7.76 points, or 1 percent, to 7,707.33. Within the index, 28 stocks rose, 15 fell and seven were unchanged. Turnover was $128.5 million. 

This morning, Statistics New Zealand surprised the market when it reported that consumer prices were unchanged in the second quarter while annual inflation was 1.7 percent. Expectations the central bank might soon join others that have lifted or are expected to lift rates soon have been stemmed by the softer numbers.

"We're up slightly, against the trend, to another record high, and the first close above 7,700," said Mark Lister, head of private wealth research at Craigs Investment Partners. "Without a doubt the key theme is the weaker-than-expected CPI numbers, that points to no need for the Reserve Bank to do anything over the foreseeable future. People are pricing in less inflationary pressures and that has propped the market up. Obviously, as a high dividend market, lower interest rates are good for shares."

Dividend stocks were performing well, getting support from investor confidence around interest rates, Lister said, with Mercury New Zealand up 2.1 percent to $3.48 and Trustpower gaining 1.4 percent to $5.66.

"Other than that, people are biding their time waiting for the reporting season," Lister said. "The global reporting season is about to get really busy over the next two weeks, that's important because it will give us some leads and we tend to follow some of those bigger offshore markets. We're crossing our fingers we don't see any profit warnings between now and then, and we haven't so far which is good news."

Fisher & Paykel Healthcare was the worst performer, down 1.8 percent to $11.05. Managing director Lewis Gradon has sold almost half of his shares in the medical device maker, raising about $3.1 million to help buy a house.

"Markets do tend to take those sorts of things as a negative; if you see an important member of the management team selling, markets are only going to read negatives into that for obvious reasons," Lister said.

New Zealand Refining rose 1.2 percent to $2.46. In its throughput and margin report for May and June, the oil processor said it achieved a gross refinery margin of USD 7.63 per barrel in the period, and got $58.4 million in processing fees, up from $43.3 million in the previous year.

"It was slightly better than expected, volume growth was better than expected though they did lose a bit from the impact of currency movements," Lister said. "All-in-all, it wasn't too bad and the market seems reasonably comfortable."

Z Energy rose 1 percent to $7.98. The company today reported its operating figures to June 30, which showed it sold 1,000 million litres of fuel in the first quarter, up from 975 million litres the prior year, with growth from jet fuel sales.

"It was reasonably solid, not a huge amount of new news - you could almost describe it as a bit neutral to be honest," Lister said.


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