Bank shares rally after let off from Royal Commission

New Zealand shares followed Australia higher as banking stocks rallied on both sides of the Tasman after a Royal Commission into the sector was less harsh than many had feared. Dual-listed lenders Australia & New Zealand Banking Group, Westpac Banking Corp and AMP all rallied.

Tuesday, February 5th 2019, 6:12PM

by BusinessDesk

The S&P/NZX 50 index climbed 94.31 points, or 1.1 percent, to 9,073.72. Within the index, 33 stocks rose, six fell and 11 were unchanged. Turnover was $142.5 million.

Australia's S&P/ASX 200 index was up 2.1 percent in afternoon trading, after Commissioner Kenneth Hayne's 76 recommendations didn't go as far as some expected.They may even be a boon for the profitability of Australia's 'four pillars' by introducing a flat fee paid to mortgage brokers and ditching trail commissions.

The dual-listed lenders led New Zealand's market higher, with Westpac up 7.8 percent at $28.08 on the NZX and ANZ gaining 7.8 percent to $28.34. Outside the benchmark, AMP jumped 11 percent to $2.56.

Still, all three have struggled while the Royal Commission ran its course and as Australia's housing market slows. ANZ is down 8.9 percent over the past year, with Westpac falling 23 percent and AMP slumping 55 percent over the same period.

"The big moves in the banks are in sheer relief," said James Lindsay, a portfolio manager at Nikko Asset Management.

The local market is closed for Waitangi Day tomorrow, although ASB Bank parent Commonwealth Bank of Australia and Insurance Australia Group are scheduled to report across the Tasman. Neither stock is listed on the NZX, although both IAG and ASB have listed debt securities in New Zealand.

Other than the report, Lindsay said local investors are waiting for the domestic earnings season to begin next week. Contact Energy is the first to report on Monday and was the most heavily traded stock today. Almost 5.1 million shares changed hands, compared to a 90-day average of 983,000. They increased 0.2 percent to $6.04.

"People are waiting for earnings season to kick off," Lindsay said.

Fisher & Paykel Healthcare was the second most traded stock on a volume of 2.8 million, compared to its 655,000 average. It rose to 1 percent to $12.82.

Fletcher Building rose 2.2 percent to $5.04 on a volume of 1.9 million. The country's biggest construction company reports on Feb. 20 and has already downgraded its Australian earnings outlook due to slower residential work.

ASX-listed building materials firm Boral yesterday issued a profit warning over extreme rainfall on Australia's east coast and delays to major government infrastructure projects. James Hardie Industries today noted the slowing Australian housing market, while also projecting faster sales growth than the wider sector.

Lindsay said the Boral warning sparked fears that Australia's housing market may have deteriorated further, especially after a slump in new building approvals issued in December.

Of other companies trading on volumes of more than a million shares, Trade Me Group increased 0.2 percent to $6.32, Auckland International Airport rose 1.3 percent to $7.365, Kiwi Property Group rose 0.4 percent to 1.43, and Precinct Properties New Zealand was unchanged at $1.495. Spark New Zealand advanced 2.3 percent on less than a third of its average volume. Heartland Group rose 1.5 percent to $1.38 gain on volume of one million shares - three times its 90-day average.

Vista Group International posted the biggest fall, down 1.3 percent at $3.90 on light volumes, while Kathmandu Holdings decreased 0.8 percent to $2.44.

Port of Tauranga was unchanged at $5.17, while South Port New Zealand fell 3 percent to $6.50 on very small volumes. Hawke's Bay Regional Council, the owner of rival Napier Port, today appointed Deutsche Craigs and Goldman Sachs as joint lead managers of a planned initial public offering. NZX shares were unchanged at $1.02.

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