RBNZ optimism shot in arm for shares

Ryman leads stocks up as OCR outlook calms virus nerves

New Zealand shares rose as investors took heart from the Reserve Bank indicating the impact of the coronavirus outbreak on the domestic economy and corporate earnings would be short-lived.

The S&P/NZX 50 Index gained 63.70 points, or 0.5 per cent, to 11,898.24. Within the index, 24 stocks rose, 21 fell and five were unchanged. Turnover was $193.8 million.

The Reserve Bank kept the official cash rate at 1 per cent yesterday, as expected, but changed its forecasts to remove the chance of future cuts with governor Adrian Orr talking down the long-term impact of the coronavirus outbreak on the domestic economy.

That followed an upbeat lead from Wall Street after China’s foremost medical adviser said the epidemic would likely peak this month and may be over by April.

Michael McCarthy, chief market strategist at CMC Markets, said equity investors were under-pricing the risk from coronavirus. In contrast, investors in commodities took a more pessimistic outlook on the global economy, he said.

“Oil prices are down 16-17 per cent and gold is holding multi-year highs, so those markets are expressing real concerns, but share investors seem to blithely going along,” McCarthy said.

Still, McCarthy said the best performers on New Zealand’s benchmark index had defensive characteristics, such as utilities and property companies.

The local market was led higher by retirement village operator

Ryman Healthcare — up 2.9 per cent at $16.87 — and electricity generatorretailer Meridian Energy, which rose 2.9 per cent to $5.76. Among other utilities to gain, Mercury Energy was up 2.1 per cent at

$5.44, Contact Energy rose 1.3 per cent to $7.57 and Genesis Energy increased 0.2 per cent to $3.20.

Growth stock Pushpay Holdings rose 2.8 per cent to $4.70.

Tourism Holdings gained 1.1 per cent to $2.94 after research group Jarden upgraded its rating to “outperfom”, saying the current share price was a compelling entry point for a business with a strong competitive position and exposure to a tourism industry which has seen strong growth.

The rental RV operator has been under pressure as investors fretted about the impact the coronavirus outbreak would have on domestic tourism.

A2 Milk group rose 1.6 per cent to $15.8, bolstered by the resurgence in global optimism.

Stock market operator NZX fell 0.7 per cent to $1.38. McCarthy said that was at odds with the strong performance of the local market.

“One of the reason traders like to look at the performance of exchange shares themselves is they are essentially a prediction of the share outlook,” he said.

Sky Network Television shares fell 4.8 per cent to a record low 60 cents after the pay-TV operator reported a 78 per cent slide in first-half profit.

Greg Smith, head of research at Fat Prophets, said the company was heading in right direction, but that it appeared as though investors needed more evidence before they started backing it again.