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Current as of 30/09/16 12:19PM NZST

NZX rises as low interest rates continue

New Zealand shares rose as low interest rates continued to underpin demand for yields on stocks.

Sky Network Television and Fletcher Building gained while Air New Zealand dropped on concern a recovery in oil prices will drive up fuel costs.

The S&P/NZX50 Index gained 39.58 points, or 0.6 per cent, to 6,789.98. Within the index, 28 stocks advanced, 17 fell and four were unchanged.

Turnover was $135.9 million. The market traded lower at the end of last week and through this week, before the Reserve Bank's announcement this morning that it had kept the official cash rate unchanged at 2.25 per cent, a record low.

"The guidance certainly seems to be leaving the potential for more rate cuts on the table," said James Smalley, director at Hamilton Hindin Greene. "There's that underlying support for the market of the yield differential between what you can get at the bank and what our stocks are still paying - even though the market's had a pretty good run, I think that's going to continue to underpin it."

Coats Group led the index, up 2.5 per cent to 62 cents.Sky TV gained 2.1 per cent to $5.27, and is up 12.4 per cent this year. Investors have been wary of the company, which have struggled to retain subscribers with growing rivalry from services such as Netflix and faces higher costs to secure content in the increasingly competitive market.

Precinct Properties rose 2 per cent to $1.275 while Tower was up 2 per cent to $1.785. Fletcher Building, which counts Australia as its second-largest market, advanced 1.8 per cent to $6.67.

"Over the Tasman, the Victorian budget's come out and they're looking at spending about $30 billion on infrastructure," Smalley said.

"It looks like that infrastructure spend in Australia is really starting to pick up. Australian trading has been one of the laggards of the Fletcher conglomerate. If they get anywhere near the type of performance they're getting in New Zealand, that stock will be very strong."

Freightways gained 1.8 per cent to $8.35 and Mighty River Power rose 1.5 per cent to $3. Genesis Energy advanced 0.5 per cent to $2.055. It will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up.

The Auckland-based power company has signed a 'swaption' contract with Meridian Energy, which today rose 1.2 per cent to $2.61, meaning Meridian will have the two 250 megawatt Huntly 'Rankine' units on standby for any periods of low inflows to hydro lakes that could compromise security of electricity supply.

Westpac Banking Corp was the biggest decliner, down 3.7 per cent to $33.76.Air New Zealand fell 3 per cent to $2.56, marking a sixth consecutive session of losses. Smalley said the improvements in oil prices, which rose 3 per cent overnight to the highest price since November, may have made investors think oil had bottomed out.

"Oil been a very good tailwind for airline stocks, so maybe investors are starting to say that's as good as it gets, cashing their chips," Smalley said. "Maybe some investors are taking money out of airline stocks and putting it into oil stocks - the oil companies in Australia are doing pretty well today, which is kind of the opposite of what's been going on for the last two days."

Kathmandu Holdings declined 1.8 per cent to $1.67, while Orion Health Group lost 1.7 per cent to $4.11. Z Energy dropped 1.4 per cent to $7.15.

The Commerce Commission's decision on whether to approve Z Energy's application to buy Chevron New Zealand's service station chain is due tomorrow, having been delayed multiple times.

Z wants to buy the Caltex and Challenge! branded chains from Chevron New Zealand for $785 million, giving it 49 per cent of the retail market.

A2 Milk shed 0.6 per cent to $1.80. Smalley said concerns about ASX-listed dairy processor Murray Goulburn, which has been sold off heavily amid concerns about their results and their selling channel into China, might be flowing through as A2 tends to have a lot more Australian investors on board.Outside the main index, G3 Group was unchanged at 81 cents and has dropped 2.4 per cent this year.

The NXT-listed mail operations and document manager held its profit margins above target in the fourth quarter of the financial year, made two acquisitions and lifted volumes by 29 per cent.

- BusinessDesk

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