NZ stocks: Market up on Wall St rally, Air NZ announcement

12.00 pm

The New Zealand sharemarket kicked off the session in positive territory today as the Government came to Air New Zealand's rescue with an $885 million combination of loan and equity.

The benchmark NZSE-40 index was up 11.29 points, or 0.60 per cent, at 1906.98 on turnover worth $20 million by just after 11 am.

Air NZ has requested trade in its shares -- which was suspended last week after comments from the Prime Minister and major shareholder Brierley boosted the stock -- resume at midday today.

Air NZ's unrestricted B-shares last traded at 40c, as did its resident-owned A shares.

The bailout plan will see the Government take a controlling stake in the carrier. It will provide a $300 million loan which will later be converted to shares, as well as investing another $585 million directly in new ordinary shares in the company, taking its shareholding to around 83 per cent.

The loan will be advanced by October 19, and the whole deal will be completed during December or January.

Forsyth Barr equities dealer Alan Wills said today's announcement was a step in the right direction for Air NZ.

"The immediate issue of the viability and the balance sheet reconstruction has really been sorted now.

"The market can now see the whole picture.

"We now have the information and the market can trade on the facts."

That news, along with a rally on Wall Street overnight, had given the local bourse a major boost, Mr Wills said.

"The world markets are giving us a hell of a lot of confidence," he said.

Technology stocks led a powerful rally in New York overnight on a soothing outlook from tech giant Cisco Systems Inc, news of surprising strength in the economy's service sector and President George W Bush's talk of economic stimulus from the federal government.

The Nasdaq Compositive Index surged 88.48 points higher, or 5.93 per cent, to 1580.81 -- the largest percentage gain for the market measure since April 18. The Dow Jones industrial average climbed 173.19 points, or nearly 2 per cent, to 9123.78.

"The equity markets are a good place to be at the moment," Mr Wills said.

"There is a huge amount of liquidity going into the markets, huge amounts of Reserve Bank intervention in interest rates and easing of liquidity.

"It is just boing boing markets at the moment."

Leading the local charge were Telecom, up 6c at 451, Auckland Airport, up 7c at 348 following the Air NZ announcement, and Fisher & Paykel, which leapt 55c to 1365, ahead of Monday's shareholder meeting to vote on the firm's plan to split its healthcare and appliance divisions.

Sky City was up 2c at 1127, Brierley -- which will see its stake reduced to single figures after the government injection -- was down 1c at 38c and Independent News Ltd, was up 5c at 325.

In all, rises outnumbered falls by 45 to 18 among the 100 stocks changing hands by mid morning.

In other movements on the market this morning Advantage Group was up 2c at 34c, yesterday's star performer Fletcher Building shed 4c to 271, Contact was down 2c at 345 and The Warehouse slipped 1c to 586.

- NZPA