MARKET CLOSE: NZ shares rise on low-rates outlook, upbeat Fed

Thursday 30th April 2009

New Zealand’s NZX 50 Index rounded out a 5.8% monthly gain, rising today after the central bank said it will keep its benchmark interest rate low through the second half of 2010 and shares rallied globally on more upbeat comments from the Federal Reserve.

The NZX 50 rose 40.87, or 1.5%, to 2740.58, the biggest gain in 10 days. Within the index, 34 stock rose, 13 fell and three were unchanged. Turnover was $135.8 million, the second-highest this year, after yesterday’s $145 million. Fletcher Building rose 5% to $6.70, Pumpkin Patch gained 4.4% to $1.20 and Freightways rose 3.6% to $2.90.

Reserve Bank Governor Alan Bollard cut the official cash rate 50 basis points to 2.5% as expected, saying: “Business sentiment is low, investment has been curtailed and employment” declining. “We expect to keep the OCR at or below the current level until the latter part of 2010,” he said, with the timing and extent of a global recovery “highly uncertain.”

The announcement of a prolonged period of stimulatory central bank policy coincided with the Fed’s decision to keep its target rate “exceptionally low” at zero to 0.25%. It said the outlook for the U.S. economy had “improved modestly.”

The Dow Jones Industrial Average climbed 2.1% yesterday. Today, Japan’s Nikkei 225 surged 3.9%, Hong Kong’s Hang Seng rose 3.7% and Australia’s S&P/ASX 200 Index climbed 2.3% to 3780.50.

“The world’s got a bit more comfortable that we’re getting things fixed,” said Craig Brown, equities manager at ING New Zealand Ltd. “Based on historical analysis, the New Zealand market looks pretty well priced, though with some earnings risk.”

Building products maker Fletcher climbed even after announcing an additional $20 million top-up to its capital raising, bringing the total to about $525 million. It took advantage of an NZX rule change to issue more capital after its shares advanced, boosting the appeal of its discounted offer.

“It’s a good company, well managed, with a great set of assets,” ING’s Brown said. “We’re starting to see signs coming out of the US, out of Australia, even New Zealand that maybe the residential market is starting to stabilize.”

Australian rival Boral climbed 6.8% to A$4.09 on the ASX. Also helping Fletcher and Freightways, their recent share issues increase their weighting in benchmark indexes at the expense of Telecom and Contact Energy, forcing index-weighted fund to increase their holdings. Telecom rose 3.7% to $2.82 and Contact fell 1.4% to $5.70.

Nuplex Industries gained 9.1% to 36 cents, leading the NZX 50 higher. With the completion of its capital raising, at a deep discount, the company is better placed to benefit from a recovery in its markets, managing director John Hirst said this week. “There are difficult trading conditions out there for everybody at the moment,” Hirst said. “It’s nice to have the pressure off from a balance sheet perspective.”

Freightways, whose courier and freight delivery units include New Zealand Couriers, Kiwi Express and SUB60, today posted a 4% gain in nine month profit, saying its ‘resilient’ business model buffers the company from recession. Investors snapped up shares in the company’s $45 million placement last months at $2.44 a share, which was a 12% discount at the time.

NZ Farming Systems Uruguay slid 8.3% to 55 cents, extending its slide since announcing on April 28 that it now expects a wider full-year loss because of the impact of drought on milk production in the South American country where it develops dairy farms.

Jeweller Michael Hill International rose 5.8% to 55 cents.

PGG Wrightson rose 5.5% to $1.35. The nation’s biggest rural services company tends to benefit when prospects for the primary sector pick up. This week Fonterra Cooperative, the world’s biggest dairy exporter, raised its forecast milk payment for farmers by 10 cents to $5.20 a kilogram.

New Zealand Oil & Gas rose 1.5% to $1.39. The oil and gas explorer and producer today said it paid 40,000 Euros for two years’ of study work in areas of Romania where the government was expected to offer licence areas later this year. That payment will rise to 235,000 Euros “if certain milestones are all met”. With the third-largest proven oil reserves in Europe, Romania was “an interesting hydrocarbon province,” chief executive David Salisbury said on a phone conference today.

NZX, the stock exchange operator, rose 3.6% to $7.15 after announcing it has agreed to acquire the energy and related assets of Marketplace Co, which operates New Zealand’s spot electricity market.

Businesswire.co.nz

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