MARKET CLOSE: Rally continues; Pumpkin Patch, MHI gain

Tuesday 4th August 2009

New Zealand shares extended their gains for the 15th day in 16, led by children’s clothing chain Pumpkin Patch (NZX: PPL ) and jeweler Michael Hill (NZX: MHI ) as optimism about a return of global growth spurred a flow of funds into equities.

The NZX 50 Index rose 44.95, or 1.5%, to 3092.80, the highest since October 3. Within the index, 33 stocks advanced, six fell and 11 were unchanged. Turnover was $112.8 million.

Pumpkin Patch climbed 6.1% to $1.74, the highest close since May 2008. Michael Hill rose 4.6% to 69 cents. The two retailers count Australia as their single biggest market by store numbers. Australia’s central bank Governor Glenn Stevens today said consumer spending, and exports, were “notable for their resilience.” He kept the RBA’s benchmark interest rate unchanged at 3%.

“Australia has done a fantastic job of avoiding a technical recession,” said James Lindsay, equities manager at Tyndall Investment Management. “That’s rubbed off nicely on New Zealand.”

ANZ (ASX:ANZ) rose 3.3% to $24.80 after Australia’s fourth-biggest lender said it had agreed to acquire Royal Bank of Scotland’s retail and commercial banking operations in Taiwan, Singapore, Indonesia and Hong Kong, and its institutional units in Taiwan, the Philippines and Vietnam for US$550 million.

Air New Zealand (NZX: AIR ) rose 3.6% to $1.15, the highest since early September. The airline's fuel hedge position will slash fuel costs in 2010 by $560 million, based on an average price for West Texas intermediate oil of US$72 per barrel at an exchange rate of 60 US cents, according to a Morningstar Research report. Much of that will be passed on to travellers as intense competition spurs airlines to lower fares.

Fletcher Building (NZX: FBU ) climbed 1.5% to $7.51 and Steel & Tube (NZX: STU ) gained 1.6% to $4.56, the highest level since January 6. On Wall Street yesterday, the Standard & Poor’s 500 Index rose above 1,000 for the first time in nine months after figures showed US manufacturing shrank less than expected in July while construction rose, helped by government spending on infrastructure projects.

Tyndall’s Lindsay said that “around the world people are trying to grasp green shoots and that seems to be in full flight.”

“There’s new money coming into equities,” he said. “I would not be surprised if a few fund managers around the world upgrade their asset allocations.”

Still, from its low on March 3, the NZX 50 has rallied 28% and stocks now selectively offer good value “whereas in March it was widespread,” Lindsay said.

Wakefield Health (NZX: WFD ) tumbled 8% to $9.20 after the private hospital operator slashed its earnings forecast for the first half of this year as the worst economic slump in 30 years slowed demand from patients using the private health system.The shares are up 15% in the past three months.

Profit in the six months ended September 30 will be 30% to 40% lower than the year-earlier $6.1 million, the company said in a statement. The short-term outlook is uncertain, and if the weakness persists, Wakefield Health also expects the full-year profit to “fall materially short of last year’s record result.”

Telecom (NZX: TEL ) rose 1.1% to $2.86 after the Commerce Commission failed in its attempt to overturn a High Court ruling that the phone company had not abused its market power over internet access. The High Court last year rejected a Commerce Commission case that Telecom used its dominant position in the market for fixed line residential phone services when it introduced its 0867 internet access package in 1999. The regulator appealed the ruling, but the Court of Appeal has now turned down the appeal.

Cavalier (NZX: CAV ) rose 4.4% to $2.40 and Sky Network Television (NZX: SKT ) gained 3.6% to $4.56.

Businesswire.co.nz

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