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MARKET CLOSE: NZ shares buoyed by RBA rate cut, US-China trade talks

Wednesday 3rd July 2019

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New Zealand shares rose as lower interest rates across the Tasman and cooling trade tensions between the US and China buoyed investor sentiment, underpinning demand for yield stocks such as Property For Industry and Contact Energy. 

The S&P/NZX 50 Index increased 67.41 points, or 0.6 percent, to 10,531.94. Within the index, 27 stocks rose, 18 fell, and five were unchanged. Turnover was $103.9 million. 

The local market got a boost late in the day from the Reserve Bank of Australia cutting its target cash rate to 1 percent, increasing the attraction of utilities, infrastructure companies and property firms offering reliable dividends. That initially lifted S&P/ASX 200 Index, although the Australian benchmark was up just 0.1 percent in late trading. 

Investors were already in an upbeat mood after the US and China agreed to return to the negotiating table in an effort to avoid the tit-for-tat imposition of tariffs in the on-going trade stoush. 

"The market has had another strong day on light turnover, with reasonable offshore leads based on trade truces and negotiations being seen as more positive," said Peter McIntyre, an investment advisor at Craigs Investment Partners. 

McIntyre said the Australian rate cut made property stocks even more attractive in a low interest rate environment, given the reliable dividends they typically pay. 

Among today's gainers, Property For Industry rose 2.1 percent to $2.20, Stride Property was up 1.4 percent at $2.23 and Argosy Property increased 1.1 percent to $1.395. Other yield stocks also gained, with Contact Energy up 1.9 percent at $7.95 and Trustpower rising 1.6 percent to $7.49. 

Fletcher Building led the market higher, up 2.9 percent at $5.04 on a volume of 1.4 million shares, more than its 90-day average of 1.2 million. Government data today showed new house building permits hit a 45-year high in May. Fletcher's residential unit has been one of its strongest performers.

McIntyre said investors are still assessing the update the firm provided last week, which outlined plans for a $300 million share buyback and noted a weaker trading environment in Australia than anticipated. 

Goodman Property Trust was the most traded stock with 3.8 million units changing hands, almost four times its 950,000 average. The stock was unchanged at $1.92 ahead of tomorrow's annual meeting. 

Spark New Zealand was unchanged at $4.05 on a volume of 2.1 million shares, less than half its average 5.1 million. 

Arvida Group fell 0.2 percent to $1.36 on a volume of 1.8 million shares, more than its usual volume of 390,000. The retirement village operator's shares today shed rights to buy shares at $1.15 apiece in a renounceable rights issue. 

Kathmandu Holdings posted the day's biggest decline, down 2.3 percent at $2.10 on a volume of 101,000 shares, less than its 157,000 average. Tourism Holdings fell 1.3 percent to $3.80 and Mercury NZ was also down 1.3 percent at $4.54. 

Heartland Group Holdings was unchanged at $1.65 after announcing a new A$250 million funding facility for its Australian reverse mortgage business. The company restructured its business last year to ensure its Australian unit could access funding without needing to meet New Zealand banking prudential limits.

Heartland Bank's submission on the Reserve Bank's capital requirement proposals was published this week, throwing its support behind the stricter regime because it would reduce the advantage the big four Australian-owned banks have. 

Outside the benchmark index, Plexure Group extended this year's rapid gain, rising 7.7 percent to $1.12, valuing the firm at $146 million. The stock has soared 285 percent so far this year, making it the best performer so far on the S&P/NZX All Index. 

Westpac Banking Corp's capital notes paying 4.965 percent annual interest were the most traded debt security on a volume of 1.01 million. They closed at a yield of 2.91 percent, up 1 basis point. 

Spark's 2026 bond paying 3.94 percent traded on a volume of a million notes. It closed at a yield of 2.47 percent, down 8 basis points. 


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