NZ stocks: Market purrs after Reserve Bank rate call

12.05pm

The New Zealand sharemarket looked mildly pleased with this morning's Reserve Bank of New Zealand decision to keep key interest rates on hold.

Against a backdrop of negative sessions yesterday both here and overseas, the market's leading indices showed a firmer tone throughout the morning.

By 11.30am the NZSX-50 gross index was 6.56 points or 0.26 per cent higher, while the NZSX-40 capital index was 4.49 points or 0.19 per cent higher at 2281.79.

Total turnover was worth $46.98 million with 34 rises and 24 falls among the 116 stocks traded.

Before the market opened this morning, Reserve Bank Governor Alan Bollard said in the bank's quarterly Monetary Policy Statement the official cash rate would remain unchanged at 5.25 per cent. He also indicated the bank was planning to intervene to lessen volatility in the New Zealand dollar.

The news surprised the foreign exchange markets and the kiwi fell immediately and by 11.30am was trading at US65.79c -- a cent lower than its local open

First NZ Capital research manager Barry Lindsay said the news this morning was positive for the sharemarket.

However, previous favourable interest rate decisions had produced more noticeable effects and he said the market appeared to be "heaving a sigh of relief" more than anything else.

He said knocking the currency down was "of great benefit to the majority of New Zealand stocks, and in fact to the economy because we're an export nation and we know the high level of the currency was going to have very negative effects on our economy going forward".

Mr Lindsay said the market "may be starting to believe that the extremes of overvaluation (of the NZ dollar) have now passed".

"All in all a positive outcome for investors," he said.

Market leader Telecom, which yesterday rose 3c to a two-and-a-half year closing high continued to move up this morning, adding 5c by 11.30am to take it to 581.

Trade in Telecom at $21.14 million worth accounted for almost half of the market's total turnover.

Among the second tier stocks, Carter Holt Harvey was down a cent at 200, Contact Energy was unchanged at 514, Fletcher Building was up a cent at 418, Fisher & Paykel Appliances was off a cent to 429 after its recent run up to all time highs, and The Warehouse was a cent lower at 439.

One of the bigger moves among the top 50 was Port of Tauranga which was up 8c to 450.

Elsewhere, Auckland International Airport was down 2c to 648, Cavalier Corp was down 2c to 500, Fisher & Paykel Healthcare was up 5c to 1160, Michael Hill was up 3c to 525, Promina was up 3c to 408, Steel & Tube Holdings was down 2c to 381 and TelstraClear was down 3c to 531.

- NZPA