NZ stocks rise on US toxic asset plan; Nuplex advances

Tuesday 24th March 2009

Shares rose, pushing the NZX 50 index higher for the first day in three, as optimism the Obama administration's plan to acquire up to US$1 trillion of toxic assets from banks may help lift the U.S. economy spurred a global rally.

The NZX 50 rose 43.91, or 1.7%, to 2635.33 at the 5 p.m. close of trading in Wellington. Within the index, 40 stocks rose, two declined and eight were unchanged. Turnover was NZ$89.97 million.

Nuplex Industries, a specialty chemicals maker, rose 28% to 68 cents as the New Zealand dollar advanced, reducing the value of its overseas debt that had contributed to a breach of its bank covenants.

Fisher & Paykel Appliances, the whiteware manufacturer which may have to raise more share capital as the value of overseas debt rises, jumped 8.1% to 40 cents. Rakon, the navigation components maker that gets sales in the U.S. and Europe, climbed 7.4% to $1.30.

The Standard & Poor's 500 Index surged 7.1% overnight, paring its 12-month decline to 42%, after the U.S. government announced the plan to soak up the toxic bank assets to revive lending and stoke the world's biggest economy.

In Asia today, the Nikkei 225 Index rose 1.5% and Australia's S&P/ASX 200 gained 0.9%.

"I think we're close to the bottom," said Alan Moore, who helps manage NZ$1250 million at Milford Asset Management.

Nuplex and F&P Appliances are two of the three worst performers this year, slumping 82% and 73% respectively since Dec. 31. "Two of our leading industrial companies - that's a bit sobering really," Moore said.

Nuplex shareholders will get seven new shares for each one held at 23 cents apiece, raising $132.8 million, the company announced today. It was forced to raise more and lower the price after a backlash from investors. Moore says he will support the issue, saying he sees value in the issue at 23 cents apiece.

The New Zealand dollar has gained 16% to 57.10 U.S. cents in the past two weeks and was recently at 57.11 cents as the U.S. toxic asset plan helped drive the U.S. dollar lower by undermining its safe haven status.

Sanford, the fish exporter, fell 2.4% to $5.60 as a higher currency erodes the value of its overseas revenue.

Australian banks rallied as their U.S. counterparts led the charge on Wall Street, with Westpac Banking Group climbing 2.8% to $23.65 on the NZX, ANZ Banking Group gaining 4.9% to $19.30, and insurer AMP increasing 6.7% to $5.75.

Banks led the rally on Wall Street. Bank of America gained 26%, JPMorgan Chase rose 25.7%, and Citigroup advanced 19.5%.

"It's been a pretty positive response on the back of the finance sector; the sale of toxic assets has the effect of recapitalising the banks," said Bryon Bourke, head equities trader at ABN AMRO Craigs. "We're not out of the woods yet - we're still in a bear market rally," but equities would have a long way to fall to reach a new bottom, he said.

Fletcher Building, New Zealand's largest construction company, rose 3.1% to $6.29 on optimism it stands to benefit from government spending on highways and associated infrastructure. An unexpected gain in sales of existing U.S. homes last month also buoyed sentiment for the company that owns the U.S.-based Formica laminates business. The shares have surged 20% in the past 10 days.

Steel and Tube Holdings, the maker of steel building supplies, rose 3.5% to $2.70.

Mainfreight, the nation's biggest trucking firm, rose 4.9% to $4.10. Guinness Peat Group, which owns the Coates threadmaker business in Europe, rose 5.5% to 77 cents.

by Paul McBeth, Businesswire.co.nz

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