MARKET CLOSE: NZ stocks mixed on earnings outlook, higher bond yields

Tuesday 9th June 2009

New Zealand shares ended the day mixed amid concern corporate earnings will remain subdued while rising bond yields sap the appeal of the yield available from equities.

Kiwi Income Property Trust (NZX: KIP ) led decliners after shedding its dividend.The NZX 50 Index edged up 5.78, or 0.2%, to 2822.40. Within the index, 23 stocks fell, 15 rose and 12 were unchanged. Turnover was a lackluster $43.8 million.

Contact Energy (NZX: CEN ) fell 0.7% to $5.63, its second daily decline since announcing yesterday that underlying earnings would fall 30% to 33% this year on weak wholesale power prices. Meantime, bond yields have pushed higher. The yield on the 10-year government bond was last at 5.98% from as low as 4.25% in late January.

“It’s hard to see earnings rebound any time soon - we're not going to see upgrades in the next three to four months,” said Paul Robertshawe, head of equities at Tower Asset Management. “Bond rates are kicking up,” making stocks “a bit less attractive,” he said.

Kiwi Income fell 5.3% to 90 cents. Property investors as a group were among the biggest decliners on the NZX today, with the NZSE Property Group index slipping 2.2%.

Property Trusts are typically held for their relatively high dividend yields. ING Property Trust slipped 1.8% to 56 cents and AMP NZ Office Trust fell 1.3% to 74 cents.

NZ Farming Systems Uruguay (NZX: NZS ), which develops dairy farms in South America, fell about 2% to 50 cents after a European Union trade delegate said dairy export subsidies won’t be eliminated until 2013.

PGG Wrightson (NZX: PGW ) rose 3.8% to $1.37, leading the NZX 50 higher. Rakon (NZX: RAK ), which sells components for navigation systems, climbed 2.5% to $1.64. Vector (NZX: VCT ), the nation’s biggest electricity and gas lines company, rose 1.4% to $2.12.

Fletcher Building (NZX: FBU ) fell 1% to $6.82. Figures today showed New Zealand’s total building work fell by a smaller-than-expected 0.7% in the first quarter, though the decline is set to accelerate in the latest three months following a slump in construction permits.

“There’s a big disconnect” between the work numbers and new building consents issued, said Cameron Bagrie, chief economist at ANZ National Bank. The weakness from fewer new work permits in the first three months of the year “will flow into the second quarter” for the value of building work data, he said.

Steel & Tube Holdings (NZX: STU ), which sells steel building products, fell 0.4% to $2.84.

Sky City Entertainment Group (NZX: SKC ) rose 1.5% to $2.80. Jeweller Michael Hill International (NZX: MHI ) fell 4.3% to 67 and Hallenstein Glasson Holdings (NZX: HLG ) fell 3.9% to $2.50. Children’s clothing chain Pumpkin Patch (NZX: PPL ) fell 1.5% to $1.32.

Businesswire.co.nz

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