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MARKET CLOSE: NZ shares bounce as Asian markets rise; Auckland Airport, Chorus, Genesis gain

Monday 27th June 2016

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New Zealand shares bounced today as Asian markets traded strongly in the afternoon, with companies offering stable dividends attracting interest from investors wary about potential cuts to the official cash rate. Auckland International Airport, Chorus and Genesis Energy gained. 

The S&P/NZX 50 Index rose 19.14 points, or 0.3 percent, to 6,686.92. Within the index, 22 stocks rose, 21 fell and seven were unchanged. Turnover was $126.7 million.

The local bourse dropped 2.3 percent on Friday as news of the United Kingdom's vote to leave the European Union trickled in throughout the day. It was down 1.2 percent in early trading on Monday but has bounced back since midday.

Markets across Asia traded higher this afternoon, with Australia's S&P/ASX 200 up 0.5 percent, Japan's Nikkei 225 gaining 2.3 percent and China's CSI 300 rising 1.2 percent. 

"We're the first market open today and we had a bit of a catch-up because markets around the world performed worse than we did on Friday," said Rickey Ward, New Zealand equity manager at JB Were. "The Asian markets were sold pretty heavily from midday Friday. Since Asian markets have opened up today, they have performed a bit better and therefore the trend has been very much led by them - the Australian market turned more positive, and we did too."

Bond yields have dropped since last week's vote, making company dividends more attractive for investors. Ward said a lot of the afternoon's buying had come back into defensive names, with electricity companies seeing ongoing demand as well as property companies. 

Steel & Tube Holdings rose 2.8 percent to $1.87 and Auckland International Airport gained 1.8 percent to $6.26. 

Chorus rose 1.8 percent to $4.07, Genesis Energy gained 1.5 percent to $2.04 and Fletcher Building 1.2 percent to $8.19. 

"At the moment, there's a higher level of guesswork on future earnings," Ward said. "New Zealand is to a large degree immune to that, which is why you're starting to see some of those defensive names get renewed support - what happened around the globe has no bearing on property companies and electricity companies. If you believe we're going into a lower interest rate environment, they provide plenty of income so people are happy to pay up for that."

NZME, which listed today on the NZX All Index, dropped 20 percent to 80 cents. The New Zealand print media and radio assets spun off from APN News & Media didn't trade in the first hour after listing at midday as investors questioned the valuation. As at 12:58pm, NZME stock was bid at 85 cents while holders were asking 98 cents a share, down from $1.05 they started the session at. The stock listed at $1.

"It's a bad day to list and people are trying to get a feeling on what multiple to put on this with a lack of detail around it," Ward said. "There's reasonable volume, just a tough day for it. It's pretty much 100 percent owned by offshore investors listing on a domestic market, the weighting was likely to be more sellers than buyers but a lack of information makes it hard to value."

Friday saw large falls in growth-oriented companies which have recovered some of those losses today, along with Tegel Group Holdings which Ward said was due to its recent initial public offering.

Tegel gained 4.4 percent to $1.65, making it the best performer on the index. Xero rose 3.1 percent to $17.52, and A2 Milk gained 2.4 percent to $1.73.  

Ward said it was natural to see a contraction in such stocks, which are bought into on future earning prospects, in such uncertain environments.

Air New Zealand was the worst performer, down 2.6 percent to $2.05, Orion Health fell 2.6 percent to $4.59 and Tower dropped 2.3 percent to $1.30.

Auckland City Council also decided to withdraw its retail bond proposal, citing the Brexit vote.

BusinessDesk.co.nz



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