NZX CLOSE: NZ shares pare gains as rate hikes eyed; Farming Systems rises

Thursday 15th October 2009

New Zealand shares pared earlier gains, with the NZX 50 Index ending the session marginally higher, after inflation data stoked expectations the Reserve Bank will raise interest rates sooner and Australia’s central bank governor signaled higher borrowing costs.

The NZX 50 rose 4.80, or 0.2%, to 3191.29, a 12-month high close. It climbed as high as 3205.68 in intraday trading. Within the index, 27 stocks rose, 12 fell and 11 were unchanged. Turnover was $94 million.

NZ Farming Systems Uruguay rose 6.8% to 47 cents after renegotiating the terms of fees payable to PGG Wrightson and instituting annual reviews of the management contract. Wrightson climbed 4.8% to 65 cents. The trade-off for the reduced fees was an extension to the term of the contract.

Telecom Corp. fell 1.9% to $2.57, leading decliners on the index today amid concern the rally in equities may be running out of puff. The NZX 50 has climbed 32% from its lows in March, helped by a revival in business and consumer confidence and optimism global growth is recovering.

“These signs are positive for bringing investing back into growth assets,” said Paul Richardson, chief investment officer at BT Funds Management, which oversees about $2.1 billion.

“But to back these prices we need an earnings pick-up,” he said. “It’s more a case of can it carry on from here the reality is markets are looking pretty fully priced.”

Government figures today showed inflation unexpectedly accelerated in the third quarter, driving up the kiwi dollar on speculation Reserve Bank Governor Alan Bollard will bring forward the timing of interest rate increases.

The Consumer Price Index rose 1.3% in the third quarter, for an annual pace of 1.7%, according to Statistics New Zealand. Inflation was expect to pick up to 0.8% in the third quarter, for an annual rate of 1.2%.

Inflation was “surprisingly strong,” said Khoon Goh, senior markets economist at ANZ National. “The Reserve Bank will not welcome this. There’s a risk we will see an earlier tightening than what was expected.”

The New Zealand dollar extended its gains, reaching a 14-month high of 74.89 U.S. cents after the data and comments from Reserve Bank of Australia Governor Glenn Stevens that that nation must ensure it isn’t too timid in raising rates again now the economy is recovering.

Rakon Ltd., which makes most of its sales on overseas markets, sank 0.8% to $1.19 today. The company announced an institutional placement of 18.8 million shares at $1.15 apiece to raise funds for expansion, it said after the close of trading.

Air New Zealand, which depends on inbound tourists for traffic on its long-haul routes, fell 0.8% to $1.32.New Zealand Oil & Gas, which benefits from exports of oil, declined 0.6% to $1.72.

Pan Pacific Petroleum snapped a two-day slide, gaining 5.7% to 56. The stock had dropped after the company said it may have missed out on a piece of an offshore Vietnam prospect because another party used its pre-emptive rights.

Richardson said across all asset classes, highly rated corporate bonds are looking the most attractive right now. Companies with exposure to Australia may benefit from that country’s stronger growth prospects.

Pumpkin Patch, the children’s clothing chain that counts Australia as its biggest market, rose 1% to $2.

Hallenstein Glasson Holdings, which operates a chain of Glasson women’s wear stores in Australia, gained 1.7% to 3.

Mainfreight Ltd., the biggest trucking firm on the NZX 50, rose 3.2% to $5.54. The company “is a window into the domestic economy,” Richardson said. “But can it push higher from here.”

Businesswire.co.nz

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