Wall Street leads property stocks higher

New Zealand shares followed Wall Street higher after new data indicating an improving US economy pushed two of the major indices to a new record.

Monday, August 24th 2020, 6:29PM

by BusinessDesk

The property sector drove local gains.

The S&P/NZX 50 Index rose 85.13 points, or 0.7 percent, to 11,921.07. Within the index, 33 stocks rose, 12 fell and five were unchanged. Turnover was $152.7.8 million.

The S&P 500 and Nasdaq both closed at record highs in the US on Friday after data showed some strength in the U.S. economy. Business activity returned to early 2019 levels in August and a report showed a second consecutive record rise in home sales in July.

New Zealand picked up this lead this morning as the first market to begin the new week of global trading.

“We’ve been buoyed by a strong close on Wall Street on Friday with better home sales driving the market over there,” said Peter McIntyre, an investment advisor at Craigs Investment Partners.

“That lead has driven us into having a strong day on reasonable volume.”

Tourism Holdings led the market higher, jumping 7.3 percent to $1.91 — its highest level since early July.

“It is travelling on no news and light volume,” McIntyre said. “Investors are still trying to digest where its valuation point is.”

Retirement village developer and operator Arvida Group rose 5.2 percent to $1.63 and Summerset Group Holdings rose 3.2 percent to $8.40.

McIntyre said NZ’s careful management of virus outbreaks had given investors confidence in retirement stocks, while low interest rates were making anything with exposure to the property market appealing.

“A lot of these listed-retirement village operators are typically property plays,” he said.

Other stocks in the property sector also saw strong gains: Argosy Property rose 3.1 percent to $1.35; Vital Healthcare Property Trust advanced 2.8 percent to $2.95; Property for Industry gained 2.2 percent at $2.5750; and Goodman Property Trust was up 1.9 percent at $2.3650.

Chorus reported full year earnings showing the pandemic knocked earnings, but accelerated some underlying trends supportive to the company’s outlook, such as driving demand for reliable connectivity.

McIntyre said the result was in line with guidance and the share price was up on the dividends the company offers.

The company said it expects to pay 25 cents in 2021 before adopting a utility-like dividend policy the following year, which investors have assumed will mean bigger cash payments.

The shares dipped 0.4 percent in early trading, but rallied to an all-time high of $8.2050.

“If free cash flow is available to be redistributed to investors they will do so, and it looks like their dividends will increase so you’ve seen some investors jump on board,” McIntyre said.

Freightways, on the other hand, announced it won’t pay a final dividend after its net profit fell 25 percent amid ongoing uncertainty about the economic impact of covid-19.

The stock fell 2.6 percent after the announcement but rallied throughout the day, closing up 1 percent at $7.10 after the Prime Minister announced a shorter-than-feared extension of Auckland's level 3 lockdown, which is now scheduled to lift on Sunday night.

Comvita narrowed its annual bottom-line loss and stressed a turnaround in operating results as it recorded a second-half profit on record revenue.

McIntyre said the company needed to give the market some confidence and this result was the first step in that direction.

Over the weekend, the NZ dollar fell against the US dollar but was stronger against most other trading partners' currencies.

The kiwi was trading at 65.30 US cents at 5pm in Wellington, down from 65.40 cents on Friday.

The trade-weighted index was at 70.78 at 5pm, up from 70.67 on Friday. The kiwi traded at 91.14 Australian cents from 90.81 cents, 69.12 yen from 69.08 yen, 55.36 euro cents from 55.06 cents, 49.89 British pence from 49.38 pence, and 4.5184 Chinese yuan from 4.5171 yuan.

Tags: Market Close