Hot property market drives shares higher

New Zealand shares finished the week at an all-time high, led upwards by property and retirement stocks as central bank stimulus adds heat to the housing market.

Friday, October 9th 2020, 7:05PM

by BusinessDesk

The S&P/NZX 50 Index rose 44.62 points, or 0.4 percent, to 12,280.54. Within the index, 28 stocks rose, 15 fell and seven were unchanged. Turnover was $136.5 million.

The benchmark index is at a record high after gaining almost 4 percent across the past five days.

Hopes of a trillion-dollar stimulus deal in the US and positive corporate news locally have been driving the upward momentum.

Oceania Healthcare led the market higher, rising 4.8 percent to $1.30, while fellow retirement village operator, Summerset Group Holdings, rose 4.5 percent to $9.72 as it continued to attract buyers to the sector after reporting record unit sales for the September quarter.

“There is an increasing sense that the housing sector is really starting to boom again,” said Matt Goodson, managing director at Salt Funds Management. “There was a little bit of fuel added to the fire yesterday when Summerset reported its numbers.”

Other property stocks also made gains: Kiwi Property Group rose 2.6 percent to $1.165, Stride Property rose 1.9 percent to $2.19, Property for Industry climbed 1.8 percent to $2.81.

Fletcher Building, a big player in housing construction, rose 2.3 percent to $4.45.

Investore Property rose just half a percent to $2.23 after saying it expects an $85.3 million valuation increase to its property portfolio, now worth $980.3 million based on draft independent valuations.

Goodson said a large inflow of money into passive property funds had also contributed to the sector’s rise, as it resulted in aggressive buying of local stocks.

Today, Forsyth Barr analysts Andrew Harvey-Green and Scott Anderson said in a note that Contact Energy had a “good chance” of entering the MSCI NZ index at the November 2020 rebalance.

“Companies typically experience a spike in trading volumes after inclusion as passive funds tracking the index buy shares, we reiterate our ‘outperform’ [rating],” they said.

The stock rose on the market today, jumping 4 percent to $7.85 — its highest level since October 2019.

“There is no certainty in these things, and there have been surprises in the past, but currently it looks as though it will go in,” said Goodson.

He said the stock has already climbed on the market’s expectation the Tiwai Point aluminium smelter, which Contact’s earnings are exposed to in the short-term, will stay open for several more years.

Tiwai’s main supplier, Meridian Energy posted the day’s biggest decline, falling 1.8 percent to $5.40. It is already included in the MSCI NZ index.

The kiwi dollar broke through 66.00 US cents as traders closed out short positions, taken after the Reserve Bank’s comments about negative rates yesterday, to take risk off the table before the weekend.

“There is too much Twitter from Trump and political risk of jibber-jabber over the weekend, so you’d probably just take your profits,” said Martin Rudings, a private client manager at OMF.

“We don’t read too much into it at the moment, most of the direction is coming from the northern hemisphere, so we’ll wait and see.”

The kiwi dollar was trading 66.07 US cents at 5pm in Wellington, up from 65.71 cents yesterday.

The trade-weighted index was at 70.88 at 5pm, from 70.83 yesterday. The kiwi was unchanged at 91.99 Australian cents, traded at 69.92 yen from 69.64 yen, 56.10 euro cents from 55.82 cents, 50.99 British pence from 50.81 pence, and 4.4344 Chinese yuan from 4.4616 yuan.

Tags: Market Close