MARKET CLOSE: NZ shares gain after central banks hold rates, led by Ebos, Tower and Orion Health

Thursday 22nd September 2016

New Zealand shares gained as investors took comfort after central banks made no interest rate moves, with Ebos Group, Tower and Orion Health Group leading the index higher.

The S&P/NZX50 Index rose 30.54 points, or 0.4 percent, to 7,311.71. Within the index, 26 stocks rose, 18 fell and six were unchanged. Turnover was $112.4 million.

Three central bank meetings - the Bank of Japan, the US Federal Reserve and New Zealand's Reserve Bank - held meetings in the last 24 hours. The Fed, whose officials had earlier hinted it could move to raise rates pushing global markets into a spin, stayed put, as did the local central bank.

"While it was expected the Federal Reserve and the RBNZ would do nothing, markets like that certainty, so now they're behind us people feel as if they've got a bit more clarity over the short term at least to get on with things," Mark Lister, head of private wealth research at Craigs Investment Partners, said. "The Reserve Bank in New Zealand pretty clearly signalled that they want to cut rates at least one more time. That whole low-interest theme is still behind us as a tailwind for the time being, so that's probably causing a bit of support."

Ebos Group led the index, up 2.7 percent to $18.90.

Tower gained 2.6 percent to 98.5 cents. It has dropped 49.5 percent this year after its first-half results disappointed and it had to provision $16 million extra for Christchurch earthquake claims. This morning, the Australian Financial Review published a report saying it could be ripe for a takeover.

"It's obviously had a very rough ride over recent weeks and fallen heavily, but it looks like there's a few bargain hunters come into the mix," Lister said. "Tower's always attracted a bit of takeover speculation, you might see one of these Australian companies come and have a go at it, so even though operationally it's still got its problems you've seen some of that takeover talk re-emerge simply because the share price has been beaten up."

Orion Health Group rose 2.5 percent to $3.69. The health software developer is still on track to return to profit in 2018, though the strength of the kiwi is crimping revenue in local currency terms and drained more cash than anticipated.

The worst performers on the index were led by those who gave up dividends, with Chorus down 2.6 percent to $3.79, Heartland Bank falling 1.9 percent to $1.57, Spark New Zealand dropping 1.4 percent to $3.575 and Fletcher Building down 1.2 percent to $10.60.

Fonterra Shareholders Fund dropped 0.5 percent to $5.90. Fonterra Cooperative Group, which has raised its forecast milk payout twice in as many months, posted a 65 percent gain in full-year profit today as cost cutting and cheaper milk prices made up for a decline in sales. The 2016 accounts show Fonterra trimmed its selling, marketing and distribution expenses and reduced its finance costs. Debt reduced by $1.6 billion to $5.5 billion while its gearing ratio fell to 44.3 percent from 49.7 percent.

"It was a great result, net profit was up 65 percent which is pretty good by anyone's standards and it looks like the management team has really turned Fonterra around from being in a bit of a difficult spot over the last couple of years," Lister said. "It comes on the upgrade news from yesterday, it just builds on that strong New Zealand economy story as well."

Outside the main index, Trilogy International fell 12.9 percent to $4.05. The skincare and home fragrance company dropped to a three-month low after it raised its full-year sales guidance for a second time, suggesting investors were hoping for even better news at today's annual meeting in Auckland.

"It was weaker than the market was looking for, it's been punished for disappointing the market. Put that in perspective - even after that fall, it's still up 46 percent this year, so it's had a stellar run," Lister said. "That's the thing with some of these high-flying growth stocks, it doesn't take much to see them sold off - investors get quite sensitive to any bad news, or news that's not as good as they'd hoped."

Restaurant Brands rose 0.9 percent to $5.70. The fast food seller posted a 32 percent gain in second-quarter sales, with the bulk of the increase coming from the 42 KFC stores in New South Wales acquired in April.

BusinessDesk.co.nz

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