Investors chase yield in low-rate environment and push shares higher

New Zealand shares bounced back from yesterday's Donald Trump-induced slump, as the attraction of stocks paying reliable dividends remains strong in a low-interest rate environment. Meridian Energy, Chorus and Infratil were among the gainers today.

Tuesday, May 7th 2019, 7:09PM

by BusinessDesk

The S&P/NZX 50 Index rose 66.77 points, or 0.7 percent, to 10,027.39. Within the index, 28 stocks increased, 16 fell, and six were unchanged. Turnover was $105.8 million.

The local market joined an Asia-wide rout yesterday when the US president spooked investors by raising the prospect of further tariff hikes on Chinese goods. US Trade Representative Robert Lighthizer today accused China of reneging on previous trade commitments.

However, the confirmation of tariffs did little to deter investors, with equity markets across Asia recovering some of yesterday's decline. China's Shanghai Composite Index was one of the hardest hit on Monday, but was up a modest 0.2 percent in late trading.

Utility companies were among today's local leaders, with reliable dividends still a major drawcard for investors, especially with the chance of another interest rate cut at tomorrow's Reserve Bank policy review. Meridian rose 1.8 percent to $4.18 on a volume of 1.3 million shares, Chorus was up 2.5 percent at $6.20 and Infratil increased 2.7 percent to $4.55.

"How low can interest rates go? Because that's what's really driving the local market," said Grant Williamson, a director at Hamilton Hindin Greene.

Williamson said there's a large volume of money that will need to be reinvested, with a number of upcoming debt maturities and the proceeds of the $2.56 billion Trade Me Group takeover.

"In the low interest rate environment, you don't know how many investors are prepared to put that money back into fixed interest."

Precinct Properties New Zealand's 2024 bonds paying annual interest of 4.42 percent were the debt market's biggest volume security with 730,000 notes changing hands today. The bonds traded at a yield of 3.59 percent, up 1 basis point. Precinct's shares rose 1 percent to $1.60 on a volume of 629,000 shares, about two-thirds its 90-day average.

Local exporters also bounced back from Monday's selloff. A2 Milk led the market higher, up 3.2 percent at $16.44 on a volume of 649,000 shares, less than its 832,000 three-month average. Fisher & Paykel Healthcare gained 1.7 percent at $15.60 on a volume of 524,000 shares.

Goodman Property Trust was the most traded stock on a volume of 8 million units, more than 10 times its 90-day average volume of 634,000 units. It rose 1.5 percent to $1.73.

Spark New Zealand declined 0.7 percent to $3.615 on a volume of 2.3 million shares, less than half its average volume. NZX was up 1.9 percent at $1.07 on a volume of 1.5 million shares, well up on its 214,000 average.

Contact Energy was the only other top 50 company to trade on a volume of more than a million shares, up 0.3 percent at $6.88.

Property For Industry rose 1.3 percent to $2.015 on 109,000 shares, almost half its average volume, ahead of its annual meeting tomorrow. Pushpay Holdings, which reports its annual earnings tomorrow, was up 1.1 percent at $3.82 on 369,000 shares, in line with its usual volume.

Genesis Energy increased 0.5 percent to $3.07 on a volume of 426,000 shares. The electricity retailer and generator today released a tender for $18.4 million of customer debt that it's been unable to recover.

Fletcher Building slipped 0.2 percent to $5.23 on a smaller volume than usual of 589,000, after announcing senior executive Michelle Kernahan is leaving the company.

Metlifecare posted the biggest decline, down 2.6 percent at $4.81. Oceania Healthcare was down 1.9 percent at $1.05 and Ryman Healthcare fell 1.6 percent to $12.

Willamson said retirement village stocks are still under pressure, with the slowing housing market removing what had been a tailwind for the sector.

Tags: Market Close