Better news out of US and Europe drives NZX rally

New Zealand shares joined a rally across Asia as better than expected US and European manufacturing figures revived investors' confidence in the global economy. Fisher & Paykel Healthcare led the market higher.

Tuesday, August 4th 2020, 8:13PM

by BusinessDesk

The S&P/NZX 50 Index rose 105.63 points, or 0.9 percent, to 11,771.72. Within the index, 31 stocks rose, 12 fell, and seven were unchanged. Turnover was $163.9 million.

Stocks across Asia were strong after US manufacturing activity expanded in July at the fastest pace in more than a year, following data showing a small improvement to manufacturing activity across the Atlantic as well. Hong Kong's Hang Seng rose 0.8 percent in afternoon trading, while Japan's Topix was up 2 percent at the local market's close.

“We’ve seen an improvement come through Europe, into the US and into Asia, so it’s really a snowball running through markets,” said Peter McIntyre, an investment adviser at Craigs Investment Partners.

The local benchmark got an extra kick when the Reserve Bank of Australia held the cash rate at 0.25 percent. The S&P/ASX 200 rose almost 2 percent in afternoon trading.

McIntyre said holding interest rates “lower for longer” supported capital markets by making fixed interest assets such as bonds and term deposits less attractive, and are partly responsible for elevated share prices.

“Some reasonable earnings have been coming out of the US as well, holding those valuations up along with those low interest rates,” he said.

Some investors remain cautious about the resurgence of the coronavirus. But even that played in favour of the local index given F&P Healthcare, the country's biggest listed company, has seen increased sales of its respiratory products during the outbreak.

The respirator manufacturer rose 3.1 percent to $37.18, leading the market higher.

“Our market is being driven by a strong day by Fisher & Paykel Healthcare,” McIntyre said.

Brokers have been upgrading their forecasts for the stock because demand for F&P Healthcare’s products will remain high if the virus lingers.

The same was not true for other virus sensitive stocks. Vista Group International dropped 2.3 percent to $1.25, the day’s biggest decline, as many of its customers cannot reopen movie theatres until the virus is fully under control.

Ryman Healthcare fell 2.3 percent to $12.90 after the company said it was difficult to predict how new lockdown restrictions in Victoria will impact its earnings in financial year 2021.

The retirement village operator said work at its construction sites in the region will be significantly reduced over the next six weeks.

Auckland International Airport also declined 2.1 percent to $6.22 after Prime Minister Jacinda Ardern suggested the airport was getting ahead of itself as it readied a safe travel corridor between NZ and the Cook Islands.

Ardern today told media there were “many elements that need to be worked through” before quarantine-free travel can happen.

Tourism Holdings dropped 0.5 percent to $1.85, but Air New Zealand rose 0.8 percent to $1.33.

Australian banks listed on the NZX bounced back from yesterday's sell-off as investors digested the more upbeat economic data.

ANZ rose 2.7 percent to $19.07 and Westpac gained 2.6 percent at $18.21.

Refining NZ rose 1.4 percent to 72 cents. The oil refinery operator today said it was expecting a $158 million post-tax impairment charge to be taken in its first-half earnings, due to be reported on Aug. 17.

McIntyre said investors were unsurprised by the impairment as the company had already been going through tough times.

The electricity sector was stronger, with Trustpower and Mercury Energy both gaining more than 2 percent at $6.83 and $4.745 respectively.

Tags: Market Close