NZ shares rise as investors look for safety

New Zealand shares rose as the local economy's relatively strong recovery from the covid-19 lockdown attracted investors keen to limit their exposure to the likes of Australia and the US, where the virus is spreading once more.

Friday, July 17th 2020, 6:23PM

by BusinessDesk

The S&P/NZX 50 Index rose 78.99 points, or 0.7 percent, to 11,584.05. Within the index, 24 stocks rose, 19 fell, and seven were unchanged. Turnover was $150.2 million.

Property stocks were among the stronger performers as investors sought the relative safety of tangible assets and reliable cash flow as new infections in the US reached a daily record.

Australia’s S&P/ASX 200 Index started the day stronger, but quickly turned negative once the state of Victoria announced a record 428 new covid-19 cases. The ASX 200 was flat in late trading.

The local market was one of the best performers across Asia, with global investors encouraged by the NZ’s virus-free status, and manufacturing data that showed a pick-up in activity.

“We are seeing modest net inflows pushing the market up with investors favouring the businesses they have more confidence in through a potentially tougher run with covid,” said Shane Solly, a portfolio manager at Harbour Asset Management.

Property for Industry - which counts manufacturers as tenants - was among market leaders today, rising 4.1 percent to $2.54.

Other property stocks also gained. Vital Healthcare Property Trust rose 2.7 percent to $2.63, Investore Property increased 2.6 percent to $1.97, Precinct Properties New Zealand advanced 2.4 percent to $1.74 and Goodman Property Trust was up 2.1 percent at $2.19.

Solly said the strong June performance of manufacturing index was an important indicator for the domestic economy which was supporting some sectors.

“Certainly, the property stocks do benefit from that improved activity,” he said.

Kiwi Property Group was the only decliner in the sector, dropping 1.5 percent to $1.02.

Resturant Brands New Zealand led the market higher, gaining 6.4 percent at $12.09, on a typically light volume of just 8,000 shares.

“The market as a whole is on quite low volumes as we are in a bit of a vacuum between reporting seasons,” Solly said.

Fonterra Shareholders’ Fund units fell 0.3 percent to $3.88. The dairy exporter upgraded its 2020/21 milk price by 4 percent to a midpoint of $6.40, due to recovering consumer appetite in China. It also trimmed the top of the forecast range for the season that's just finished due to a stronger currency.

Solly said strong consumer demand was good news for the dairy industry but bad news for non-farmer investors in the fund because the increased farm-gate price would increase operating expenses for Fonterra. The fund offers outside investors exposure to Fonterra's earnings stream and potential dividends.

A2 Milk rose 2.2 percent to $20.70, likely buoyed by the improved demand from its key market. Its main supplier Synlait Milk fell 1 percent to $7.09.

Meridian Energy rose 2 percent to $4.69 as it continued to recover from last week's drop on Rio Tinto's decision to close the Tiwai Point aluminium smelter next year. Contact Energy also gained, up 0.4 percent at $5.77.

While defensive stocks proved attractive, investors took a risk-off approach to virus-sensitive companies as the excitement from the vaccine update wore off.

Vista Group International dropped 4.5 percent to $1.28, the day’s biggest decline. Air New Zealand fell 3 percent to $1.30 and Kathmandu Holdings slipped 2.6 percent to $1.12.

“Stocks that have been a little bit stronger on the potential for a vaccine have given back some of their recent gains,” Solly said.

Tags: Market Close