Wednesday 17th December 2008
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The NZX 50 gained 20.486, or 0.8%, to 2715.57, its second daily advance of that magnitude. Within the index, 20 stocks gained, 10 fell and 20 were unchanged. Insurer Tower Ltd. rose 5.2% to $1.42, leading the index higher, and Rakon Ltd. advanced 3.6% to $1.45.
The gain in local stocks follows a rally on Wall Street post the Fed's statement, sending the Standard & Poor's 500 Index up 5% and the Dow Jones Industrial Average up 4.2%. Tech stocks also jumped, with the Nasdaq Composite gaining 5.4%. New Zealand's benchmark index has fallen 34% this year.
"The reaction has been a positive for equity markets - I think it will help, but it's no cure-all, there's no quick fix," said Cameron Bagrie, chief economist at ANZ National Bank.
"Don't get caught in the hype - policy makers are pulling out all the stops to attach the bungy cord," he said. "We're facing challenging times."
Fletcher Building, which owns the US-based laminates business Formica, rose 2% to $6.05 and has gained 5% in the past month. Tourism Holdings rose 1.6% to 62 cents after saying it has a conditional agreement to sell its 49% shareholdings in InterCity Holdings Limited for $9.5 million to its joint venture partners. The company said it will book a loss on the sale of $3.7 million on the sale.
Michael Hill International, which is reorganizing its units to extend its shift to Australia and gain tax benefits, rose 3.3% to 63b cents.
PGG Wrightson, the nation's biggest rural services company, slipped 0.6% to $1.59, after cutting its profit forecast, citing a loss at its real estate business, the economic downturn and a writedown of its stake in NZ Farming Systems Uruguay. Profit in the year ending June 30 is likely to be in $39-$45 million range, down from the $46-$51 million forecast range it gave shareholders at their annual meeting in October.
NZ Farming Systems Uruguay fell 2.6% to 76 cents after Wrightson said it will write down its 11% stake in the company. In October, NZ Farming Systems said global financial turmoil had forced it to postpone capital raising to fund its expansion.
New Zealand Oil & Gas fell 0.8% to $1.32 after crude oil for January delivery fell 1.7% to US$43.74 a barrel on the New York Mercantile Exchange. Earlier today, NZOG said it had acquired 5.77% of Pan Pacific Petroleum, increasing its exposure to the Tui oil field.
The government is scheduled tomorrow to release its budget update, which is expected to show a deteriorating position in the wake of a local recession and ongoing worldwide slump.
Bagrie predicts the central bank will cut the official cash rate to below 4% next year from 5% currently.
"We're in a tough economic climate and there will be pressure through 2009," he said.
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