MARKET CLOSE: NZ stocks gain for fifth day, Fletcher gains

Saturday 31st January 2009

New Zealand stocks rose, pushing the NZX 50 Index higher for a fifth straight day, on optimism the central bank is taking the right steps to limit the impact of the global downturn.

The NZX 50 climbed 4.03, or 0.1%, to 2774.14. Within the index, 20 stocks rose, 26 fell and just four were unchanged. Turnover was about NZ$117 million, exceeding NZ$100 million for a third day.

New Zealand Refining, which operates the nation's only refinery, rose 4% to NZ$6.45, leading the NZX 50 Index higher. Transport and logistics company Freightways rose 3.5% to NZ$2.95. Fletcher Building, the nation's biggest construction firm, rose 2.4% to NZ$5.65 after U.S. funds manager Capital Group announced it had increased its stake in the company to 7.26% from 6.16%.

Reserve Bank Governor Alan Bollard today urged households and businesses to ride out the economic and financial slump, saying he has room to cut interest rates further if needed. The address came a day after he cut the official cash rate by 150 basis points to a record low 3.5%.

"The actions taken to date are absolutely appropriate given what's happening to the New Zealand economy and globally," said Barry Lindsay, research manager at First NZ Capital. "We know things are damn tough but there's a future."

Lindsay said Capital Group's disclosure of an increased stake in Fletcher Building is encouraging because the U.S. fund "would know how rough things are in the U.S." and is still prepared to buy the stock.

Sky Network Television rose 1.7% to NZ$4.17 and has climbed 8% in the past month. Lindsay said demand for the pay-TV company's My Sky service is exceeding expectations to the extent that orders are backed up. The company is also benefiting from the performance of British Sky Broadcasting, the U.K.'s biggest pay-TV company, which is expanding its own high-definition offering and hiring more workers as profit climbs.

Contact Energy Ltd. rose 2.1% to NZ$6.87 and Sky City Entertainment rose 2.7% to NZ$3.10.

Media company APN News & Media fell 9.3% to NZ$2.43, leading decliners on the benchmark index. Tony O'Reilly's Independent News abandoned efforts to sell its 39% stake in the New Zealand Herald's publisher after potential bidders struggled to secure funding for a transaction.

Westpac Banking Corp. slipped 2.7% to NZ$19.75 and Australian & New Zealand Banking Group dropped 2.9% to NZ$16.50 following a drop in financial stocks on Wall Street, where Citigroup fell 7% to US$3.90.

Bollard today told the Canterbury Employers' Chamber of Commerce that he has room to cut rates further that his counterparts in the U.S. and Japan have exhausted, having cut rates to near zero.

"Lest there be any doubt, the tool box is by no means empty," he said. "We have done a lot already and it will take some time for these actions to have their full effects, but we are entering the year well-positioned on the monetary policy, liquidity management and prudential policy fronts," he said.

The New Zealand dollar recently traded at 51.20 U.S. cents, having dropped to a new six-year low of 50.78 cents after Bollard's speech.

The local economy has officially contracted for three straight quarters and economists expect little improvement through the first half of this year as job losses mount, corporate profits weaken and household wealth slips.

Economists expect the unemployment rate will rise to more than 7% by 2010. Figures today showed home-building approvals fell to a record low last month in a sign that sliding borrowing costs haven't yet revived demand in an economy buffeted by its first recession in a decade.

In Sydney today, the S&P/ASX 200 Index rose 0.4% to 3540.7. Orica rose 3.4% to A$13.54 after the company said first-quarter profit would rise on demand from mining companies. Rio Tinto climbed 3.5% to A$42.15.

In Tokyo, the Nikkei 225 Index tumbled 3.4% to 7971.61 after companies including Toshiba Corp. and Nintendo cut earnings forecasts and figures showed factory output dropped by a record 9.6% in December, underlining the nation's prospects for a prolonged recession. Toshiba tumbled 18%.

By Jonathan Underhill

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