US Fed stimulus drives global rally; Including NZ

New Zealand shares joined a global rally as the US Federal Reserve's expanded bond buying programme fed investor optimism that central banks and legislators are doing everything they can to support the world economy.

Tuesday, June 16th 2020, 5:57PM

by BusinessDesk

The S&P/NZX 50 Index advanced 89.74 points, or 0.8 percent, to 10,953.85. Within the index, 34 stocks rose, 11 rose, and five were unchanged. Turnover was $150 million.

Asian stock markets followed Wall Street higher as investors found confidence in the Fed's plan to buy corporate bonds in addition to the exchange-traded funds it already is purchasing. Stronger than expected Chinese economic data and an increased lending package from the Bank of Japan added to the upbeat sentiment.

Stephen Innes, chief global market strategist at AxiCorp, said investors were encouraged by the wall of central bank stimulus and had been “relentlessly pressing the buy button.”

Australia’s S&P/ASX 200 Index jumped 4.1 percent, Hong Kong’s Hang Seng rose 3 percent, China’s mainland indices each rose 0.9 percent and Japan’s Topix increased 3.8 percent.

Rickey Ward, NZ equity manager at JBWere, said the stimulus support confidence among local investors.

“The Fed turned the market around, it was pretty weak until they made their statement about buying the bonds,” he said. “It provided the market a reason to go higher and all we’ve done is follow that better news.”

The local market was led by the large dual-listed lenders. Australia & New Zealand Banking Group rose 4.5 percent to $20.74 and Westpac Banking Corp rose 4 percent to $19.53. Most trading in the Australian banks is on the ASX, with just 68,000 shares traded on the NZX in each stock.

Ward said the NZX was following its Australian counterpart on a smaller volume of trading.

A2 Milk, which is also dual listed on the ASX, rose 1.3 percent to $18.95. Fisher & Paykel Healthcare decreased 0.2 percent to $28.05.

Air New Zealand rose 3.2 percent to $1.63, with 2.8 million shares traded. Ward said the airline had a big following from retail investors who are chasing the company's low share price.

“What shareholders are forgetting is that the government loan could convert to equity in which case your ownership dilutes very close to zero.”

Auckland International Airport increased 1.1 percent to $6.50 and Tourism Holdings declined 1.4 percent to $2.20.

Gentrack advanced 3.3 percent to $1.59, Vista Group International rose 3 percent to $1.74 and Pushpay Holdings increased 1 percent to $7.25.

Trustpower climbed 2.9 percent to $7.20, Meridian Energy rose 2.1 percent to $4.90 and Contact Energy increased 1.9 percent to $6.35. Mercury NZ fell 2.1 percent to $4.70, posting the day’s biggest decline on the NZX 50.

Ward said the Electricity Authority's recent decision on transmission pricing helped provide certainty to the electricity market but hadn’t answered the lingering question of whether the aluminium smelter at Tiwai Point would stay open.

“The whole energy sector has been a relative under-performer, despite the fact it offers a relatively attractive yield, because people are starting to question if the smelter will remain,” he said.

Tags: Market Close