Investors bet on further central bank stimulus and low interest rates

New Zealand shares rose for a fourth day as investors bet that further central bank stimulus and ongoing low interest rates will continue to support equities.

Tuesday, July 7th 2020, 7:01PM

by BusinessDesk

The S&P/NZX 50 Index gained 87.52 points, or 0.8 percent, to 11,743.73. Within the index, 27 stocks rose, 20 fell, and three were unchanged. Turnover was $129 million.

Share markets across Asia started the week with a “positive mindset” after a front-page editorial in the China Securities Journal said “fostering a healthy bull market” was important to the Chinese economy, ASB economist Mark Smith said.

The state-sanctioned editorial triggered strong gains for Chinese equities yesterday and today, and NZ's benchmark joined the regional rise.

Peter McIntyre, an investment adviser at Craigs Investment Partners, said the steady upwards march was due to low interest rates and financial stimulus from central banks supporting equities and their promise of higher returns to investors.

“Bad news is now good news for equity markets because investors are really betting on further stimulus and lower interest rates for longer,” McIntyre said.

“That tailwind is pretty strong, and I don’t think it is going to die down anytime soon.”

However, it isn’t all just hot air, McIntyre said. Low interest rates and government bond buying enables companies to access cheap debt to fuel growth and shareholder returns.

“The useful use of that debt is to pay down high interest debt or acquire other companies,” he said.

Skellerup Holdings led the market higher, rising 3.8 percent to $2.21. The company yesterday said it will release its financial result to the market on Aug. 21, having already given upbeat guidance.

McIntyre said the rubber products maker had been performing well since its update at the end of June saying it would deliver a full year profit above $28 million and “strong shareholder returns in the years ahead.”

Goodman Property Trust rose 2.4 percent to $2.135 and Chorus advanced 2 percent to $7.85.

Fisher & Paykel Healthcare increased 1.7 percent to $35.74, having yesterday shed rights to its 15.5 cent per share dividend. McIntyre said growing covid-19 numbers were supportive for healthcare stocks and was driving its upwards trajectory.

A2 Milk gained 1.4 percent at $21.19. Both stocks have been stronger through the pandemic and now account for almost 30 percent of the index. That combined weighting underpinned today's increase for the index.

Air New Zealand posted the day’s biggest decline, falling 2.4 percent to $1.42 and Auckland International Airport slipped 0.3 percent to $6.37. The national carrier today agreed to temporarily suspend all new bookings into NZ for the next three weeks to help the government manage accommodation capacity at its isolation and quarantine facilities.

Meanwhile, a slower start to a trans-Tasman bubble is looking more likely with Melbourne returning to six weeks of lockdown tonight after the virus re-emerged in the state of Victoria.

Pushpay Holdings declined 0.9 percent to $9.13 as investors took some profit off the stock which has been trading near record highs. Across the Tasman, Australian fintech company Afterpay today announced a A$1 billion capital raise.

Outside the benchmark index, Scott Technology climbed 9.1 percent at $1.80. The robotics and automation firm said it expects earnings to take a material hit from the covid-19 pandemic, but there are signals that revenue streams are returning to normal as a number of projects come back online.

(BusinessDesk)

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