Dividend paying shares, led by Meridian and Contact, in demand as investors anticipate OCR announcement
New Zealand shares rose to a record as investors bought dividend-paying stocks, such as Meridian Energy and Contact Energy on the expectation the Reserve Bank will cut the official cash rate today. A2 Milk Co extended its rebound.
The S&P/NZX 50 Index advanced 50.84 points, or 0.9 per cent, to 5927.75. Within the index, 30 stocks rose, 11 fell and nine were unchanged. Turnover was $113 million.
Traders are pricing in a 108 per cent chance the central bank will cut New Zealand’s interest rates today, meaning a reduction of 25 basis points is fully-priced in and there’s an outside chance the RBNZ will lower the rate by 50 basis points.
That boosted sentiment for Kiwi equities, which are held for their reliable dividend, as investors look for income paying investments.
Meridian climbed 3.2 per cent to $2.23. Contact advanced 2.8 per cent to $5.14. DNZ Property Fund rose 1.4 per cent to $2.15. Precinct Properties New Zealand rose 0.2 per cent to $1.14.
“Investors are hopping in ahead of the Reserve Bank announcement . . . expectations are for an interest rate cut,” said Grant Williamson, director at Hamilton Hindin Greene. “Investors think that is going to be good for the share market and are out in force buying.”
Companies with currency exposure gained on the expectation a rate cut will drive the Kiwi dollar lower. Fisher & Paykel Healthcare, the breathing mask manufacturer and exporter, advanced 1.6 per cent to $7.54. Fletcher Building, the construction and building supplies firm with operations in Australia, gained 0.6 per cent to $8.16.
“If our interest rates do drop you’re probably likely to see a fall in the New Zealand dollar,” Williamson said.
A2, the milk marketing company, climbed 3.9 per cent to 81c. Earlier this week the company said a bid by cornerstone shareholder Freedom Foods Group and US food and beverage firm Dean Foods wasn’t compelling enough to get a board recommendation. It also canned capital raising plans for the moment.
“It initially got sold off because the company wasn’t interested in that approach they’d had from Freedom Foods,” Williamson said. “That seems to have turned around now. A2 did say no capital raise, that will make investors happy, and they have had other approaches from other parties.”
Summerset Group led the benchmark index higher, up 4 per cent to a record $4.14. The retirement village operator said it will build a sixth village in Auckland, having acquired a 127-year lease in St John’s, adding to news earlier in the week that it had bought land in Warkworth to further expand a village. Good sentiment flowed to the rest of the sector, with rival Metlifecare advancing 2.7 per cent to $4.90 and Ryman Healthcare gaining 1.1 per cent to $8.30.
“Good news [is] flowing for that company and investors are really starting to get in behind it and see the potential of the company’s expansion strategy,” Williamson said.
Pacific Edge, the biotech firm, was the worst performer on the benchmark index, down 1.6 per cent to 63c. Orion Health Group, the healthcare management software developer, fell 1.3 per cent to $3.93. Trade Me Group, the online auction site, declined 0.9 per cent to $3.35.