NZ shares cap off 10-year bull market with 0.9% weekly gain

New Zealand shares rallied into the 10th anniversary of the longest bull market in share market history, gaining 0.9 percent this week after central banks around the world indicate interest rates will remain low and might go even lower.

Friday, March 8th 2019, 7:02PM

by BusinessDesk

The benchmark S&P/NZX 50 Index gained 2.91 points, or 0.3 percent, to 9440.27 today. Within the index, 22 shares rose, 8 were unchanged and 20 fell with turnover at $149.2 million.

Greg Smith, head of research at Fat Prophets, says that in a low interest rate environment, “higher income stocks are going to be even more in favour.”

The European Central Bank was the latest to abruptly change gears, downgrading its growth forecast for the euro area overnight New Zealand time to 1.1 percent for this year, down from its previous forecast of 1.7 percent.

“The gentailers (electricity generators and retailers) are certainly in demand” because of their strong dividend yields, Smith says. Mercury New Zealand gained 3.5 cents, or 1 percent, to $3.69 while Contact Energy climbed 3 cents, or 0.5 percent, to $6.42.

Among other high yielding stocks to benefit from falling interest rates, Auckland International Airport gained 6 cents, or 0.8 percent, to $7.69, Vector advanced 4 cents, or 1.1 percent, to $3.52 and Chorus rose 7 cents, or 1.3 percent, to $5.49.

Spark was a major exception, its shares falling 7 cents, or 1.9 percent, to $3.70 and it was the most heavily traded stock with 8.1 million shares changing hands, up from the 4.65 million daily average over the last 90 days.

Smith says investors are still disappointed with Spark’s 5.6 percent drop in first-half net profit, even though the telecommunications company is paying a 1.5 cent special dividend on top of its 11 cent ordinary dividend.

Chorus was the second-most heavily traded with 2.5 million shares sold today.

A2 Milk continues its stellar run, gaining 22 cents, or 1.5 percent, to $14.72 today, although that’s a little down from the record $15 reached earlier this week.

A2 shares have gained more than 32 percent year-to-date compared with the Top 50’s 7.1 percent gain and its 55 percent jump in first-half net profit certainly didn’t hurt.

“It was obviously a very good result and it’s doing a lot better than many competitors,” Smith says.

A2’s performance over the last few years has been propelled by the success of its infant formula sales in China.

“The markets are largely pricing in a resolution” to the trade war between the US and China and certainly there have been no signs yet that A2 has been affected, Smith says.

“But also with A2, you’ve got an emerging US story as well,” he says.

A2 is now selling fresh milk in more than 12,400 stories in the US where first-half revenue more than doubled.

Sky Network Television was the day’s biggest gainer, its shares rising 3 cents, or 2.3 percent, to $1.33, but they’re still down more than 28 percent year to date as investors worry about new technologies eroding its franchise.

“That’s possibly a bit of a rebound with bargain hunters coming in,” Smith says, adding that Sky’s new chief executive, Martin Stewart, has a big task ahead of him.

It was the opposite story with cinema technology company Vista Group which was the day’s biggest decliner, sinking 13.9 cents, or 2.9 percent, to $4 on trading of 207,544 shares. The last time more than 200,000 shares changed hands in one day was last December.

It wowed investors last week with its 26.7 percent jump in first-half net profit and the shares are still up 4.7 percent since the announcement.

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