MARKET CLOSE: Stocks rally; Pike River, Fletcher gain

Thursday 16th April 2009

Shares rallied, pushing the NZX 50 Index to its biggest advance in more than a month, as some investors bet the worst of the economic slump is already priced into the market, giving more scope for capital gains.

The NZX 50 climbed 62.49, or 2.4%, to 2663.14, its fourth daily gain. Within the index, 31 stocks rose, four fell and 15 were unchanged. Turnover was $110.4 million.

Coal Miner Pike River Coal rose 6.7% to 80 cents, Contact Energy climbed 4.2% to $5.70 and Fletcher Building gained 3.5% to $6.73.

Stocks rose after advances on Wall Street as some investors took comfort from the Federal Reserve's Beige Book regional economic survey, which showed the rate of decline for some indicators has slowed.

Stocks in Asia pared their gains after China posted economic growth of 6.1% in the first quarter from a year earlier, the weakest in a decade. Japan's Nikkei 225 Index was up just 0.1% to 8752.07 in early afternoon trading. Australia's S&P/ASX 200 Index rose 0.7% to 3772.

"People like us are saying they're holding more cash than they should be, so they start chasing market exposure," said Graeme Thomas, who helps manage $250 million at Milford Asset Management. There's a perception that "most of the bad news is known" and the future may be "slightly better."

Sky Network Television rose 2.5% to $4.05. The shares are 28% under-valued, based on a discounted cash flow valuation, according to the ValueCruncher website. Milford's Thomas said the pay-TV company has "great cash flow" and faces less prospect of regulation versus free-to-air channels under the Key administration.

Sanford, the fishing company, gained 1.8% to $5.50 after announcing a $2 million investment to lift its stake in a plant processing fish in China to 50% and the purchase of an inshore trawler for $3 million.

Cavalier fell 5.4% to $1.75 as a survey showed New Zealand manufacturing activity contracted for the 11th month in a row. Manufacturing improved by 1.8 points to 40.7 in March from February, according to the Bank of New Zealand-Business NZ Performance of Manufacturing Index. A reading below 50 indicates a contraction.

"New Zealand's manufacturing industry remains in clear distress," said Craig Ebert, economist at Bank of New Zealand.

Fisher & Paykel Appliances gained 4.6% to 46 cents, trimming its slide this year to 67%.

Milford's Thomas said his firm is "moving from being defensive to looking at one-off situations that look interesting to us." Among companies that have caught Milford's eye are smaller healthcare companies Abano Healthcare and Wakefield Health.

Abano was unchanged today at $4.40 and Wakefield fell 0.5% to $8.71. Abano is rated a 'buy' by two analysts who follow the company while Wakefield has one 'hold' recommendation.

Businesswire.co.nz

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