Shares rise as virus fears spur yield buys

Property stocks among winners as bonds lose favour

New Zealand shares rose as companies paying reliable dividends became more attractive in an environment where fears over the economic impact of the coronavirus outbreak have depressed global bond yields.

The S&P/NZX 50 Index gained 131.95 points, or 1.1 per cent, to 11,834.54. Within the index, 30 stocks rose, 11 fell and nine were unchanged. Turnover was $181.4 million.

The yield on the US 10-year Treasury has dropped about quarter of a percentage point so far this year as investors fret over the impact of the coronavirus outbreak on the global economy.

ASB Bank economists predict the outbreak will slow New Zealand’s economic growth by 0.6 of a percentage point.

Traders have been watching this week’s post-holiday restart of Chinese factories for signs of virus-related disruptions. Investors have been relatively upbeat as stock markets across Asia followed Wall Street higher.

Matthew Goodson, managing director at Salt Funds Management, said investors were happy to look past the coronavirus risk when there were other factors to trade on.

“There is still a fair bit of uncertainty about coronavirus but there seems to be some degree of relaxation, even if there is not a lot of hard evidence for that,” he said.

Contact Energy rose 3.5 per cent to $7.47. The electricity retailer-generator on Monday reported a 21 per cent decline in first-half earnings. Research house Jarden yesterday raised its recommendation on the stock to “outperform” saying Contact offered attractive value as the market had not priced its potential for growth in geothermal energy. It also said there was only a 15 per cent chance of Tiwai Point smelter being closed.

Meridian Energy, which is the smelter’s biggest supplier, rose 2.8 per cent to $5.60. That was boosted by the prospect of the Electricity Authority allowing a small number of big businesses to claim a discount on their electricity transmission charges.

Spark New Zealand rose 1.5 per cent to $4.82.

Goodson said property stocks were finding strong support as an alternative to bond yields. Ryman Healthcare rose 4.1 per cent to $16.40, Argosy Property rose 2.1 per cent to $1.44, Stride Property rose 0.4 per cent to $2.37 and Precinct Properties New Zealand rose

0.3 per cent to $1.875.

Synlait Milk led the market higher, up 4.6 per cent at $8.27. Jarden upgraded its recommendation on the stock to “neutral” with the 12-month target price rising to $8.84 from $8.50.

Kathmandu Holdings fell 0.3 per cent to $3.53. Jarden downgraded its rating to neutral, saying the current share price accurately reflects the balanced risk presented by the company following their acquisition of surf clothing brand Rip Curl.

Sky Network Television had the day’s biggest decline, falling 1.6 per cent to 63 cents, continuing its slide. The media group is scheduled to report first-half earnings today. Outside the NZX50, Scott Techno

logy rose 4.8 per cent to $2.17 after an announcement the company won a multimillion-dollar contract to build an automated mine laboratory in the Pilbara region of Western Australia for Rio Tinto.