NZ stocks: Telecom continues to underpin powerful rally by market

A slightly disappointing takeover bid for No 3 stock Contact Energy failed to deter investors pushing the sharemarket to a new high thanks to a buoyant Telecom.

"Everyday is a winner at the moment, it's unbelievable," said Goldman Sachs JBWere broker Murray Rutherford.

Telecom powered ahead to a new 40 month high, up 9c to 608 to add to add to yesterday's 14c gain.

Mr Rutherford said Telecom was being sought because of the growing belief that either higher dividends or a special dividend were becoming closer by the day.

The teleco was also being bought for the same reason the overall market was -- that New Zealand was seen as something of a safe haven and that the economy here had been performing stronger than had been anticipated.

The benchmark NZSX-50 gross index initially weakened on the Contact news but by the close was up 8.85 points at 2743.67. The NZSX-All capital index finished up 4.49 points at 922.14

Contact initially fell 22c to 572 on news that California-based Edison Mission Energy had sold its 51.2 per cent stake in the company to Australia's Origin Energy at 567c per share. It recovered to finish down 6c at 588.

Brokers said there would be no takers for the full takeover because of the offer price and the unlikelihood of any over-bidder against Origin.

NZ First Capital's Barry Lindsay said the news was no surprise, although most people thought Australian Gas Light (AGL) was the lead contender for the stake. He said the purchase price was within the realms of expectations.

Mr Lindsay said Contact's price was now supported by fundamentals "as opposed to any expectation of ongoing corporate activity or a revised bid or anything like that".

AGL was expected to sell its two thirds stake in NGC which would trigger a takeover. Without, that prospect NGC shares retreated 11c to 279.

Fisher & Paykel Healthcare had another stellar day, rising 10c to 1320 after a new product announcement for use in keyhole surgery.

The share price is just shy of a 13 month high.

Mr Rutherford said it was an exciting new product, "which like a lot of their products takes a long time to come to fruition, but their R&D investment is paying off for them."

Fletcher Building has also been enjoying renewed interest and demand following Steel & Tube upgrading its profit forecast earlier this week. It jumped another 9c to a equal a six year high of 490 although it closed on 487, up 6c. Steel & Tube held steady at 435 despite a broker report that it was over-priced.

Pumpkin Patch continued to rise on the back of yesterday's announcement that it now expected a net profit for the July year of $7.5 to $8 million, up from the $4 million forecast in its prospectus two months ago. The stock was up 4c at 154 today, continuing on from a 13c rise yesterday.

Lion Nathan rose 15c to 775, just 5c off its high for the year.

The Warehouse continued to recover, rising another 2c to 419 today.

Sky City fell 6c to 488 following a strong recent run. It said today it had completed the $10.5 million purchase of Tainui Group Holdings' 15 per cent stake in Hamilton's Riverside Casino, which owns the Sky City Hamilton gaming and entertainment complex.

The purchase boost's Sky City's holding in the Hamilton business to 70 per cent. Perry Developments holds the remaining 30 per cent.

Carter Holt Harvey, which has had a good run ahead of its result tomorrow, eased back 2c to 219. Others in the top 50 to slip included: Auckland Airport, 3c to 682, Port of Tauranga, 4c to 510, and Nuplex 3c to 525.

Australian banks continued to suffer, ANZ down 6c to 1992 and Westpac NZ down 4c to 1786.

Michael Hill partially recovered from its 17c beating yesterday, rising 5c to 598.

Fisher & Paykel Appliances, which has had to boost capacity in Dunedin to keep up with demand, rose 5c to 472.

NZ Refining rose 40c to 2050, its highest price in over six years, thanks to higher petrol prices and margins.

Lyttelton Port rose 7c to 175 while Ports of Auckland rose 6c to 694 and Tauranga Port fell 4c to 510.

Takeover target Richmond fell 8c to 312, 1c above PPCS's offer price.

Wakefield Hospital fell 10c to 255.

Total market turnover was a healthy 36.3 million shares worth $129.8 million of which $67.4 million was in Telecom.

There were 55 stocks to rise and 47 to fall among the 162 traded.

- NZPA