The prospect of rate cuts drive market higher; Maccas helps the rally

New Zealand shares extended their rally for a sixth day as growing expectations for an interest rate cut stokes broad-based demand for equities. Plexure Group soared after McDonald's invested in the tech minnow.

Tuesday, April 2nd 2019, 5:44PM

by BusinessDesk

The S&P/NZX 50 Index rose 104.44 points, or 1.1 percent, to a record 9,958.35, outperforming other Asian benchmarks. Within the index, 41 stocks gained, eight fell, and one was unchanged. Turnover was $137.3 million.

The benchmark index has been treading in uncharted territory, getting a leg up last week when the Reserve Bank signalled it expects to cut the record-low 1.75 percent official cash rate due to the slowing global and domestic economies.

While that surprised some analysts at the time, a survey today showing souring business confidence cemented expectations among most economists that the OCR will fall sooner rather than later.

"The Reserve Bank announcement of last week has really created some pretty strong buying in the marketplace," said Grant Williamson, a director at Hamilton Hindin Greene.

"A number of investors are looking at the future differential between interest rates and dividend yields."

Williamson said it was hard to see when the uptrend will end, but at some stage, investors will want to cash in some of their profits.

"This market is pretty hot at the moment. We've seen some pretty significant share price growth."

The NZX50's average dividend yield is 4.77 percent, the third-highest across Asia-Pacific benchmark equity indices tracked by Refinitiv. The average price-to-earnings ratio is 18.59 times, the fifth highest.

The prospect of lower rates helped dent the kiwi dollar, which was trading below 68 US cents. A weaker currency is a boon for exporters, which reap bigger export receipts in New Zealand dollar terms.

Among those beneficiaries, Air New Zealand rose 2.7 percent to $2.65, on a bigger volume than usual of 2.8 million shares. Fonterra Shareholders' Fund units were up 3 percent at $4.44, Pushpay Holdings climbed 3.1 percent to $3.35, A2 Milk increased 2 percent to $14.58, and Fisher & Paykel Healthcare advanced 2.5 percent to $15.98.

Kathmandu Holdings, which counts Australia as its biggest market, led the market higher, up 5.2 percent at $2.41, on a volume of 159,000 shares, just below its 90-day average of 180,000.

Companies paying reliable dividends, such as utilities, have been in vogue among investors keen to replace fixed interest investments. Meridian Energy gave up some of those gains today, down 1.4 percent at $4.14 on a volume of 1.5 million shares. A notice to the stock exchange showed director Mark Cairns bought 35,000 shares at an average price of $4.174 today.

Chorus also pared some of its recent gains, falling 0.4 percent to $5.85 on a volume of 1.1 million shares. Genesis Energy slipped 0.5 percent to $3.255 on 855,000, almost twice its three-month average.

Sky Network Television was the worst performer on the day, down 1.5 percent at $1.32, with just 71,000 shares traded. Its 90-day average is 1.1 million.

Spark New Zealand was the most traded stock with 5.6 million shares changing hands. It fell 1.2 percent to $3.775.

Of other stocks trading on volumes of more than a million, Kiwi Property Group rose 1 percent to $1.51 after saying the value of its portfolio rose 1.5 percent in the March quarter. Contact Energy was up 1.7 percent at $7, Auckland International Airport rose 1.6 percent to $8.35 and Z Energy gained 1.8 percent at $6.39.

Outside the benchmark index, Plexure soared 35 percent to 42 cents, the highest close in almost three years. Fast-food giant and Plexure customer McDonald's bought a 9.9 percent stake in the NZX-listed firm for $5.4 million, or 39 cents apiece. That was a premium to the 31 cents it closed at yesterday. The 1.9 million shares traded was more than 10 times its 90-day average.

Minnow biotech firm Blis Technologies rose 22 percent, or 0.5 of a cent, to 2.8 cents, extending yesterday's 28 percent gain when the firm said annual earnings beat expectations with strong orders in the March quarter.

Tags: Market Close