Fonterra Fund leads NZX higher

New Zealand shares edged up, led by the Fonterra Shareholders' Fund as a stronger than expected dairy auction was seen as an optimistic sign for the sector, despite the fact that it would add pressure to earnings.

Wednesday, March 6th 2019, 7:25PM

by BusinessDesk

The S&P/NZX 50 Index increased 15.31 points, or 0.2 percent, to 9,415. Within the index, 22 stocks rose, 20 fell, and eight were unchanged. Turnover was $189.7 million, of which Fletcher Building accounted for $52.5 million.

Fonterra Fund units rose 2.6 percent to $4.41, on a volume of 197,000, about half its 90-day daily average. The units hit a record low last week after Fonterra downgraded its earnings forecast and canned plans for an interim dividend. However, they've recovered over the last few days after Miles Hurrell was confirmed as permanent chief executive, and after the Global Dairy Trade auction showed a sharper increase in dairy prices than expected.

Peter McIntyre, an investment adviser at Craigs Investment Partners, said the increased milk price is an added cost for Fonterra and will add pressure on earnings, which the fund's exposed to.

"However, investors might be looking at Fonterra's outlook," he said.

A2 Milk CO slipped 0.4 percent to $14.75 on a volume of 805,000, while Synlait Milk was up 0.1 percent at $1.0.48 on a typically small volume of 73,000.

New Zealand's market has been attractive for investors seeking relatively stable dividend streams in an environment where global interest rates are expected to remain lower for longer.

"Those qualities, particularly in infrastructure companies, are well-supported," McIntyre said. "That's what investors are looking for."

Meridian Energy gained 1.7 percent to $3.845 on a smaller volume than usual of 874,000, while Argosy Property was up 1.2 percent at $1.265 and Stride Property gained 1 percent to $1.95.

Of companies shedding rights to dividends today, Investore Property was down, 0.6 percent, or 1 cent, after shedding rights to a 1.935 cent dividend, Goodman Property Trust was unchanged at $1.67, having shed rights to a 1.663 cent dividend, on a volume of 1 million. New Zealand Refining was also unchanged at $2.03, shedding rights to a 4.5 cent dividend.

Fletcher Building was the most active stock with a volume of 10.8 million, compared to its 1.7 million average. Of that, 9.99 million shares traded at $4.85. The stock ended the day down 1.4 percent at $4.87.

Spark New Zealand was the second most traded on a volume of 4.9 million, slightly more than usual. It increased by 0.4 percent to $3.74.

Of other stocks trading on volumes of more than 1 million, Contact Energy rose 0.5 percent to $6.47, Trade Me fell 0.3 percent to $6.40, Sky Network Television declined 1.4 percent to $1.41, Precinct Properties New Zealand rose 0.3 percent to $1.55, Mercury NZ was down 0.3 percent at $3.66, and Chorus dipped 0.2 percent to $5.34.

Fisher & Paykel Healthcare gained 1.4 percent to $14.95 on a smaller than usual volume of 518,000. The stock has been well-supported since settling a long-running patent dispute with rival ResMed. Today, it updated investors at the Deutsche/Craigs NZ investor day in Sydney.

SkyCity Entertainment Group fell 2.1 percent $3.79 on a volume of 1.2 million, almost twice its three-monthly average. The casino operator posted the biggest decline on the benchmark index for the day, and is among those companies to have already shed rights to upcoming dividend payments.

Arvida is another to have already gone ex-dividend, and was down 1.6 percent at $1.27 on a lighter volume than usual of 169,000.

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