NZ sharemarket rises on back of weaker dollar

New Zealand shares gained on continued market strength from the weaker kiwi dollar, led higher by Trade Me Group and a2 Milk Co, while Fonterra Shareholders Fund dropped as its expected final dividend was removed.

The S&P/NZX50 index rose 70.42 points, or 0.8 per cent, to 9010.61.

Within the index, 40 stocks rose, seven fell and three were unchanged. Turnover was $111 million.

Greg Easton, investment adviser at Craigs Investment Partners, said it was a fairly positive day for the benchmark index, with Thursday’s boost from the weaker New Zealand dollar following the more dovish than expected official cash rate outlook from the Reserve Bank carrying over.

“Some of the biggest movers are the duallisted NZ-Australia stocks,” Easton said.

“It could be that Australian investors are seeing a bit of value with the Aussie dollar buying $1.11 versus under $1.10 a couple of days ago.”

The notable exception to the day’s strength was Fonterra Shareholders Fund units, down 2.5 per cent to $4.98.

Fonterra Co-operative Group doesn’t expect to pay a final dividend this year, as it bolsters its balance sheet after paying Danone over the 2013 botulism scare and writing down its Beingmate Baby & Child Food investment.

The dairy processor affirmed normalised earnings per share guidance of 25-30c, implying earnings of $403m to $484m, but indicated it’s likely to be at or slightly below this range, and anticipates dividends will only be the 10c per share already paid in April.

It also trimmed its 2017/18 forecast farmgate milk price to $6.70 per kilogram of milk solids from $6.75/kg.

“It’s a chance for the new chairman to show his stance on capital structure and balance sheet strength and he has emphasised that it’s all about strengthening the balance sheet after what has been a pretty terrible year in terms of cash coming out for no good reason,” Easton said.

“It mentioned specifically the payment to Danone and the impairment on the Beingmate investment.

“This is the first time in recent years that it’s been so severe on withholding cash, and it is a bit of a surprise because it has been in a position where it’s had to help farmers out to find other ways to get cash when the payout has been low.

“This is a bit of a turnaround on that behaviour.”

Rival Synlait Milk dropped 1.4 per cent to $10.75, while Fletcher Building declined 0.9 per cent to $6.92.

Dual-listed Trade Me Group led the index higher, up 3 per cent to $4.79, with a2 Milk Co rising 2.7 per cent to $10.77 and Arvida Group gaining 2.3 per cent to $1.33.

Skellerup Holdings rose 2 per cent to $2.03 and NZX gained 1.9 per cent to $1.10.