CLOSE: NZX 50 reaches new 10-month high; Cavalier, NPX, retailers gain

Friday 14th August 2009

New Zealand shares rose, pushing the NZX 50 Index to a new 10-month high, as some investors sought to bet on an economic recovery by buying the stock most beaten up in the slump, including Cavalier Corp., Nuplex Industries and Rakon Ltd.

The NZX 50 gained 22.41, or 0.7%, to 3151.25, the highest since Oct. 3. So far this month, the market capitalization of the index has risen by $1.67 billion to $36.7 billion. Within the index, 34 stocks rose, nine fell and six were unchanged. Turnover was $107.6 million.

Cavalier (NZX: CAV ) jumped 7.3% to NZ$2.50, leading the index higher. The carpet maker has soared 117% from its low of early March, when it sunk to the weakest in at least a decade.

Nuplex Industries (NZX: NPX ), which was forced to sell shares at a deep discount this year to restore its balance sheet, rose 4.8% to $2.40. Rakon (NZX: RAK ), the manufacturer of navigation components, climbed 3.5% to $1.47. The shares traded as low as 63 cents in March.

“In the share market, what’s rallied hugely is what got beaten up pretty badly,” said Paul Richardson, who oversees $2.3 billion as chief investment officer at BT Funds Management. “Equity markets will always anticipate an economic turnaround. Leading indicators globally are starting to turn quite sharply.”

Still, stocks have now rallied to the extent that “the valuation opportunities for buying shares have disappeared,” Richardson said.

Government figures today showed retail sales unexpectedly rose 0.4%, seasonally adjusted, in the second quarter, the first such increase since September 2007, adding to evidence the economy is climbing out of its deepest recession in more than 30 years.

“It points in the right direction, that the economy is closer to exiting the recession, which could happen in the September quarter,” said Philip Borkin, economist at ANZ National Bank.

“We’re starting to see encouraging signs a base is beginning to form in retailing.” The NZSE Consumer Index climbed 1.4% today.

Children’s clothing chain Pumpkin Patch (NZX: PPL ) gained 3.3% to NZ$1.90, Christchurch-based department store Smiths City Group rose 3% to 34 cents and Warehouse Group, the biggest retailer on the NZX 50, gained 2.5% to $4.10. Clothing chain Hallenstein Glasson Holdings rose 2.1% to $2.90.

NZ Farming Systems Uruguay (NZX: NZS ) sank 6% to 47 cents, having tumbled from $1.96 in May last year. The shares have declined amid speculation the developer of dairy farms in South America needs to raise capital and may have to sell assets, Richardson said.

PGG Wrightson (NZX: PGW ) slipped 1.1% to 90 cents and Pyne Gould Corp (NZX: PGC ), which was cut to junk status by Standard & Poor’s yesterday, with a credit rating downgrade to BB+, tumbled 9.9% to $1.27.

“The inter-relations of these companies creates a problem,” Richardson said.

Steel & Tube Holdings (NZX: STU ) climbed 3.2% to $3.20 and Goodman Property Trust (NZX: GMT ) rose about 3% to $1.04.

Businesswire.co.nz

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