Index gains as rates unchanged

Spark was one of the companies whose share price lost ground. Photo / Dean Purcell

Investors comforted as US and NZ central banks hold rates.

New Zealand shares gained as investors took comfort after central banks made no interest rate moves, with Ebos Group, Tower and Orion Health Group leading the index higher.

The S&P/NZX50 Index rose 30.54 points, or 0.4 per cent, to 7311.71. Within the index, 26 stocks rose, 18 fell and six were unchanged. Turnover was $112.4 million.

Three central bank meetings - the Bank of Japan, the US Federal Reserve and New Zealand's Reserve Bank - held meetings in the preceding 24 hours. The Fed, whose officials had earlier hinted it could move to raise rates pushing global markets into a spin, stayed put, as did the local central bank.

"While it was expected the Federal Reserve and the RBNZ would do nothing, markets like that certainty, so now they're behind us people feel as if they've got a bit more clarity over the short term at least to get on with things," Mark Lister, head of private wealth research at Craigs Investment Partners, said. "The Reserve Bank in New Zealand pretty clearly signalled that it wants to cut rates at least one more time. That whole low-interest theme is still behind us as a tailwind for the time being, so that's probably causing a bit of support."

Ebos Group led the index, up 2.7 per cent to $18.90.

Tower gained 2.6 per cent to 98.5c. It has dropped 49.5 per cent this year after its first-half results disappointed and it had to provision $16 million extra for Christchurch earthquake claims. Today, the Australian Financial Review published a report saying it could be ripe for a takeover.

"It's obviously had a very rough ride over recent weeks and fallen heavily, but it looks like a few bargain hunters have come into the mix," Lister said. "Tower's always attracted a bit of takeover speculation. You might see one of these Australian companies come and have a go at it."

Orion Health Group rose 2.5 per cent to $3.69. The health software developer is still on track to return to profit in 2018, though the strength of the kiwi is crimping revenue in local currency terms and drained more cash than anticipated.

The worst performers on the index were led by those who gave up dividends, with Chorus down 2.6 per cent to $3.79, Heartland Bank falling 1.9 per cent to $1.57, Spark New Zealand dropping 1.4 per cent to $3.575 and Fletcher Building down 1.2 per cent to $10.60.

Fonterra Shareholders Fund dropped 0.5 per cent to $5.90. Fonterra Cooperative Group, which has raised its forecast milk payout twice in as many months, posted a 65 per cent gain in full-year profit today as cost cutting and cheaper milk prices made up for a decline in sales. The 2016 accounts show Fonterra trimmed its selling, marketing and distribution expenses and reduced its finance costs. Debt reduced by $1.6 billion to $5.5 billion while its gearing ratio fell to 44.3 perc ent from 49.7 per cent.

"It was a great result. Net profit was up 65 per cent, which is pretty good by anyone's standards, and it looks like the management team has really turned Fonterra around from being in a bit of a difficult spot over the last couple of years," Lister said. "It comes on the upgrade news from Wednesday. It just builds on that strong New Zealand economy story as well."

Outside the main index, Trilogy International fell 12.9 per cent to $4.05. The skincare and home fragrance company dropped to a three-month low after it raised its full-year sales guidance for a second time, suggesting investors were hoping for even better news at today's annual meeting in Auckland.

"It was weaker than the market was looking for. It's been punished for disappointing the market. To put that in perspective, even after that fall, it's still up 46 per cent this year, so it's had a stellar run," Lister said. "That's the thing with some of these high-flying growth stocks. It doesn't take much to see them sold off - investors get quite sensitive to any bad news, or news that's not as good as they'd hoped."

Restaurant Brands rose 0.9 per cent to $5.70. The fast food seller posted a 32 per cent gain in second-quarter sales, with the bulk of the increase coming from the 42 KFC stores in New South Wales acquired in April.

- BusinessDesk