Shares bounce on big banks boost

Financial stocks led the local stock market higher as they surged on an announcement the Australian federal government would roll back responsible lending rules.

Friday, September 25th 2020, 6:44PM

by BusinessDesk

The S&P/NZX 50 Index rose 107.19 points, or 0.9 percent, to 11,797.08. Within the index, 33 stocks rose, 10 fell and seven were unchanged. Turnover was $122.2 million.

The local market got a kick from across the Tasman after the Morrison government announced it would scrap responsible lending laws, which put the onus on banks to ensure loans were serviceable.

The Australian banks welcomed the news saying it would reduce onerous regulations and encourage an easier flow of loans that could boost a recovery from the covid-19 recession.

Shane Solly, a portfolio manager at Harbour Asset Management, said investors' positive response to the banks' newfound freedom drove market gains.

“It’s really about whether banks have the appetite to use that flexibility now,” he said.

Westpac Banking Corp, which recently won a lengthy court case against the regulator over alleged breaches of the lending rules, led the market higher as it surged 7.7 percent to $18.81.

Australia & New Zealand Banking Group jumped 5.2 percent to $19.10 and local lender Heartland Group Holdings - which has Australian reverse mortgage operations - also gained 1.6 percent at $1.25.

The financial sector contributed to a generally improved market sentiment following modest gains on Wall Street Thursday night as the chance of new fiscal stimulus resurfaced.

The US dollar lost some of its recent strength as investor confidence returned, allowing the kiwi to bounce off an almost two-month low as traders halted a three cent slide.

The kiwi dollar was trading 65.64 US cents at 5pm in Wellington, up from 65.29 cents yesterday — although well down from 67.94 just a week ago.

The trade-weighted index was at 71.16 at 5pm, up from 70.90 yesterday. The kiwi traded at 92.86 Australian cents up from 92.69 cents, 69.16 yen from 68.84 yen, 56.24 euro cents from 56.02 cents, 51.43 British pence from 51.40 pence, and 4.4750 Chinese yuan from 4.4519 yuan.

Heavyweight stocks on NZX 50 made strong gains: Fisher & Paykel Healthcare rose 2 percent to $33.75 and A2 Milk gained 1.6 percent at $18.44

Spark New Zealand advanced 0.9 percent to $4.67. Habour’s Solly said the stock’s 7 percent dividend yield looked “pretty interesting” compared to 10-year government bonds at less than 0.5 percent.

Oceania Healthcare announced it would offer up to $75 million of seven-year fixed rate bonds, with the ability to accept an extra $50 million if oversubscribed.

Its share price rose 2.9 percent to $1.08 as investors followed the market proverb: ‘when a stock offers a bond, buy the equity’.

Air New Zealand was unchanged at $1.315 after it announced it would be ready to do a capital raise before June 2021 after it completed its strategic capital structure review.

Outside the index, shares of The Warehouse rose 1 percent to $2.07 after founder Stephen Tindall announced he was stepping down from the board. His son Robbie Tindall has been nominated as a director for the group.

Clothing retailer Hallenstein Glasson jumped 22 percent to $5.55, the highest since late Febraury. It will pay a final dividend, reporting a small dip in annual profit, helped along by $5.1 million in New Zealand wage subsidies.

Gentrack Group announced earnings would beat the top end of analysts’ forecasts of about $11 million for the September 2020 financial year. But its foggy outlook failed to impress investors, shares in the company fell 7.3 percent to $1.40.

Finally, the NZX will get its first initial public offering of the year when pharmaceutical grade cannabis firm Rua Bioscience seeks to raise $20 million via a listing on the NZX on Oct. 22. NZX shares rose 1.3 percent to $1.62.

Tags: Market Close