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MARKET CLOSE: Investor demand continues for yield stocks

Wednesday 2nd October 2019

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(Oct. 1, 6:04 PM) NZ shares followed international markets higher as the low-interest-rate environment continues to see investor demand for yield stocks. 

The S&P/NZX 50 Index rose 71.37 points, or 0.65 percent, to 10,996.99. Within the index, 24 stocks rose, 19 fell and seven were unchanged. Turnover was light at $92.18 million.

“The S&P 500 was up half a percent and the US and European markets, for the most part, were up, so there was a positive lead and the market took a while to get going this morning,”  Grant Davies, an investment adviser at Hamilton Hindin Green said. 

“The key news for today is Kathmandu’s purchase of Rip Curl which is a reasonable-sized acquisition and looks to be a good one given the company’s core competencies,” Davies said. 

Kathmandu shares are in a trading halt as the outdoor clothing retailer completes an entitlement offer to raise $145 million for the deal. The company will pay $368 million to buy the surf brand which it says will create a billion-dollar retailer and add at least 10 percent to earnings per share. 

Briscoe Group, which owns 20 percent of Kathmandu, saw its share price fall by half a percent to $3.62 as the company decides whether to take part in the capital raise. 

Davies said the running story at the moment is really the low-interest-rate environment and demand for yield stocks, especially as there is talk of a further Official Cash Rate cut in November. 

Today the Reserve Bank of Australia decided to lower its cash rate by 25 basis points to 0.75 per cent,  as expected by economists. RBA governor Philip Lowe indicated an extended period of low-interest rates will be needed in Australia. 

The announcement was made after the NZ market closed. The ASX 200 was trading higher throughout the middle of the day and was up by 0.17 percent to 6,699.40 this afternoon. 

On the NZX strong yielding stocks such as Mercury Energy and Spark performed well today, with the electricity firm up 2.79 percent to $5.15 and the telco up 1.8 percent to $4.49 off a volume of 2.3 million shares. Spark was the second most traded company today. 

Spark told the market today that its deal for Telstra to buy a 25 percent stake in the Southern Cross Cable Network is almost completed. The transaction will see Spark’s shareholding in Southern Cross to become about 40 percent from 50 percent. 

Goodman Property Trust was the volume leader today, with its price up 0.23 percent to $2.2 off almost 3.6 million shares traded. Fellow developer and Sylvia Park mall owner Kiwi Property Group also traded more than a million shares, with its price up by 0.90 percent to $1.65. 

Others to trade over a million shares included Z Energy which fell by 0.89 percent to $5.55 and Auckland International Airport which was up by 1.64 percent to $9.30. 

Sky Network Television rose today by 1.79 percent to $1.14 after it announced today the appointment of Neil Martin as the new global chief executive of RugbyPass. 

Cannasouth shares were up by 4.92 percent to 64 cents off with more than 530,000 shares traded. The marijuana company said today it would take a stake in Hawkes Bay-based Midwest Pharmaceutics to accelerate its development. It will pay $1.32 million for a 60 percent stake. 

Gentrack continued to fall, and was down by 2.67 percent to 5.10 today after falling by almost 9 percent yesterday. The utility software firm has downgraded its expected operating earnings yet again, to between $25-26 million. It was only late July when it last downgraded earnings forecasts.

Allied Farmers was up by 4.48 percent to 70 cents after the company said its longest-serving director Andrew McDouall would retire at the company’s annual meeting next month. The investment banker was Allied Farmers’ longest-serving director having been appointed in 1999. 


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