NZX 50 rises to new record on yield hunt

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New Zealand shares edged up to a new record, paced by MightyRiverPower and Argosy Property, as investors bought dividend paying equities on the expectation interest rates will stay lower for longer. Guinness Peat Group dropped after updating the market about ongoing uncertainty around its UK pension obligations.

The NZX 50 Index rose 4.505 points, or 0.1 percent, to 5338.331, rising to a record for the fourth consecutive day. Within the index, 25 stocks rose, 19 fell and six were unchanged. Turnover was $154 million.

Economists have pared back their expectations for the Reserve Bank to resume interest rate increases after government data last week showed inflation was tracking below forecast and at the bottom of the central bank's target band. That has reduced expectations for higher interest rate, making stocks with steady dividends more attractive to investors.

"With that very benign inflation figure, money that had been sitting on the sidelines hoping for an increase in yields has seen nothing is going to happen as soon as the market thought it was," said James Smalley, director at Hamilton Hindin Greene. "In the meantime you can buy a yielding stock north of 7 percent, it still looks pretty good value compare to your 4 percent in the bank."

Stocks held for the high yield and steady income advanced. MightyRiverPower, the partially privatised energy generator and retailer, gained 1.4 percent to $2.84. Argosy Property rose 1.4 percent to $1.065. Spark New Zealand, formerly Telecom Corp, gained 0.8 percent to a six-year high of $3.135.

Sky Network Television led the benchmark index higher, up 2.1 percent to $6.26. On Friday, the country's dominant pay television provider said it had renewed its five-year contract for the broadcasting rights for rugby and said it expected annual profit to grow as much as 8.6 percent to $180 million in 2015.

Fisher & Paykel Healthcare climbed 1.7 percent to a record close of $5.55. The breathing apparatus manufacturer and exporter is expected to report earnings for the six months ended Sept. 30, which should be bolstered by about a 13 percent decline in the New Zealand dollar against the US greenback from its 88.35 US cent peak in July.

"It's momentum ahead of results," Smalley said. "Momentum begets momentum, and people are buying up ahead of results, the question is will they buy the rumour to sell the fact?"

NZX rose 1.7 percent to $1.17 after Orion Health Group lodged its prospectus for an initial public offer, seeking to raise up to $155 million. The software developer has flagged a dual-listing on the NZX and ASX in late November.

Guinness Peat Group was the benchmark index's worst performer on the day, dropping 9.1 percent to 50 cents. Its Coats unit reported flat sales in the third quarter, affirming expectations annual profit will meet market forecasts. GPG is in the process of rebranding as Coats after liquidating its broader portfolio, though that's been delayed by protracted negotiations to settle its group pension liability with the UK Pensions Regulator.

"It's a serial underperformer and the big sword of Damocles hanging over its head is that pension scheme," Smalley said. Because UK interest rates remain low, the cost of its pension scheme is now surpassing the interest it earns, making it a more expensive problem, Smalley said.

Infratil rose 0.7 percent to $2.88. The government's Accident Compensation Corp has lifted its stake in the infrastructure investors to 9.9 percent from 8.9 percent, having bought 2.7 million shares on market for $7.6 million last week.

Goodman Property Trust, the biggest listed property investor by market value, fell 0.9 percent to $1.09. The property investor said it sold two industrial sites and an office building in Christchurch for $18.9 million to an undisclosed buyer.

Nuplex Industries fell 2.8 percent to $3.16. The chemical manufacturer named Holcim Australia's Clive Cuthell as chief financial officer, replacing Ian Davis.

Outside the benchmark index, Opus International Consultants dropped 9.7 percent to $1.40 after the listed engineering firm flagged the loss of an undisclosed project which it said will weigh on profit margins and cost it $5.5 million in the year.