MARKET CLOSE: NZ shares recoup Trump losses, gains led by A2 Milk, Heartland Bank, Fletcher Building

Thursday 10th November 2016

New Zealand shares regained some of yesterday's losses, led upwards by A2 Milk Co, Heartland Bank, and Fletcher Building, while Auckland International Airport declined.

The S&P/NZX 50 Index rose 1 percent, to 69.51 points, to 6,733.72. Within the index, 27 stocks rose, 20 fell and four were unchanged. Turnover was $191 million.

The local benchmark index dropped 3.3 percent yesterday, turning to a loss around 3pm as it became increasingly apparent the US public had voted for Donald Trump as their new president. This morning, it bounced by as much as 3.4 percent after positive leads from Wall St and European markets but has pared those gains as the day wore on, lagging behind Asian markets this afternoon.

At 5:05pm, Japan's Nikkei 225 was up 5.9 percent, Hong Kong's Hang Seng had gained 1.9 percent, and Australia's S&P/ASX 200 rose 2.8 percent.

"Our friends across the Tasman are trading significantly higher, it's a strong day for resources which is driving their market, and we're crimped a bit because of the interest rate sensitive stocks we have," said Peter McIntyre, investment adviser at Craigs Investment Partners. "We've seen swap rates both here and Australia really drive to the upside, on the basis that some of Trump's policies are very inflationary, and the Reserve Bank saying unless something dramatic happens we're unlikely to cut rates again.

"When longer-term bond yields rise, we're seeing a sell-off in our more interest rate sensitive stocks, and Auckland Airport is a good example of that - it's a quality asset, but it's weaker," McIntyre said. Auckland International Airport was the third-worst performer on the index today, down 2.6 percent to $6.32.

New Zealand's two-year swap rate rose five basis points to 2.2 percent and the ten-year swaps gained 25 basis points to 3.0875 percent.

A2 Milk Co led the index, up 9.2 percent to $2.14. Yesterday it dropped 4.9 percent to $1.96. On Tuesday, the milk marketer said its first quarter sales of $112.5 million met expectations with sales driven by growth in infant formula and milk.

"That story of exporting to China hasn't gone away because of Trump," McIntyre said. "They've done it again, that switch trade below and above $2. Their first quarter update reaffirmed their position but was a bit soft to be fair, but the market likes the story and it continues to be well bid on strong volumes. It's got a lot of liquidity so if investors need to reduce quickly, they're able to, and we've seen the cut and thrust of the stock again. If it was to break out above $2.20, the likelihood is it would go even higher from there."

Heartland Bank rose 6.3 percent to $1.51, while Australia & New Zealand Banking Group gained 5.9 percent to $28.95 and Fletcher Building advanced 5.5 percent to $10.02.

Meridian Energy was the worst performer, down 3.4 percent to $3.455, while Precinct Properties dropped 2.8 percent to $1.20.

Vital Healthcare Property Trust shed 2 percent to $2.01. The Auckland-based hospital and healthcare property developer and investor, which raised $160 million in July to help fund its growth strategy, says it's in a strong position for growth and has A$77.9 million in six current developments across Australia.

Goodman Property Trust dropped 0.8 percent to $1.21. The NZX-listed commercial and industrial property investor,lifted first-half profit 38 percent, largely due to valuation gains on its investment properties, and maintained its full-year guidance.

Z Energy fell 0.1 percent to $7.40. The service station operator raised its first-half dividend as it posted a 22 percent gain in earnings and a 57 percent jump in fuel volumes following its acquisition of Chevron New Zealand's Caltex and Challenge! brands.

BusinessDesk.co.nz

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