MARKET CLOSE: NZ shares up 0.5%, weak kiwi puts exporters in focus

Friday 17th July 2015

New Zealand shares rose, led by Steel & Tube Holdings after the steel products distributor announced a $32 million acquisition. The prospect of lower interest rates and improved export earnings because of the weaker kiwi dollar continue to buoy stocks that pay regular dividends.

The S&P/NZX 50 index advanced 29.62 points, or 0.5 percent, to 5853.77, the highest level in a month. Within the index, 34 stocks gained, nine declined, and seven were unchanged. Turnover was $159 million.

Steel & Tube rose 4.9 percent to $2.77, paring the stock's 12 percent decline sine June 11, after the Petone based company said it plans to buy fastener distributor Manufacturing Suppliers for $32 million in a cash and scrip deal. The shares have been under pressure over the past month due to volatility in global steel market.

"Investors will like the fact they're diversifying a little bit more," said Grant Williamson, a director at Hamilton Hindin Greene. "Investors have been a little bit concerned by the market news, and how it will effect the performance of Steel & Tube's earnings."

A six year low in the New Zealand dollar helped companies which derive their earnings overseas by increasing the value of the exports. Speciality chemicals maker Nuplex Industries, which has been expanding its footprint in Asia, gained 2.9 percent to $4.31, accounting software developer Xero, whose biggest market is Australia, advanced 1.7 percent to $17.50, and UK based threadmaker Coats Group advanced 1.7 percent to 60.5 cents. Breathing respirator manufacturer Fisher & Paykel Healthcare rose 0.4 percent to $7.21.

New Zealand equities are in for a significant reweighting, with exporters expected to raise earnings guidance in next month’s reporting season thanks to the big fall in recent weeks of the New Zealand dollar, said Harbour Asset Management managing director Andrew Bascand.

“The kiwi dollar is 50 percent lower than its average for this year to date,” he said. “This is a fundamental move in the kiwi dollar” andt could be expected to benefit successful exporters, including Fisher & Paykel Healthcare.

“This has major implications for revenue expressed in New Zealand dollars,” said Bascand. If the kiwi dollar held at current levels over the next two or three months, exporters with strong US dollar expoisures would be giving significantly higher revenue outlooks.

“A very big twist is going to occur.”

Units in Fonterra Shareholders' Fund rose 0.4 percent to $4.72. NZX Milk Futures pricing indicates whole milk powder prices are set to fall further after yesterday's sharp decline at auction. The units give investors exposure to Fonterra Cooperative Group's dividend stream, which benefits from cheaper milk input prices.

The prospect of low interest rates also increased the attraction of companies that pay regular dividends, such as utilities and property investors. Electricity generator and retailer Genesis Energy rose 2.3 percent to $1.765, telecommunications network operator Chorus gained 2 percent to $2.88, and Kiwi Property Group advanced 1.1 percent to $1.34.

Kathmandu Holdings, the outdoor equipment chain facing a takeover by Briscoe Group, rose 0.6 percent to $1.71. Briscoe, which trades outside the top 50 index, increased 0.4 percent to $2.75. Skellerup Holdings, which manufactures rubber goods and has exposure to the agricultural sector, was the biggest decliner on the day, falling 1.6 percent to $1.25.

Insurer Tower declined 1.4 percent. It announced former Territory Insurance Office head Richard Harding as its next chief executive today.

Among the blue chip stocks, construction company Fletcher Building fell 0.1 percent to $8.27, telecommunications retailer Spark New Zealand declined 0.7 percent to $2.86, and Auckland International Airport rose 0.6 percent to $5.205.

BusinessDesk.co.nz

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