Shares rise as investors focus on yield

Air New Zealand shares jumped 6.3 per cent to $2.69 yesterday. Photo / NZME.

New Zealand shares rose as investors bought yield stocks such as Meridian Energy and Spark New Zealand, in anticipation of interest rates falling and as global sentiment became more upbeat. Air New Zealand led the index higher.

The S&P/NZX 50 advanced 55.08 points, or 1 per cent, to 5805.96. Within the index 32 stocks rose, 11 fell and seven were unchanged. Turnover was $126 million.

Investors bought income-paying equities, such as utility companies, in the expectation the Reserve Bank will move to cut the official cash rate a further 25 basis points to 3 per cent next week, with traders pricing in a 92 per cent chance of a cut.

Meridian climbed 4.8 per cent to $2.18. Genesis Energy gained 0.6 per cent to $1.72. Spark rose 0.9 per cent to $2.865. Kiwi Property Group advanced 1.5 per cent to $1.35.

"You've got 16 economists out of 16 saying a rate cut next week, obviously [between] interest rates and sharemarkets there is a very strong negative correlation," said James Smalley, director at Hamilton Hindin Greene.

"A rate cut makes yield plays look quite attractive. People are focusing more on the micro than the macro, which has been dominating headlines for the last few weeks."

Further boosting sentiment was more certainty around the outlook for Greece and its deal with creditors, while Chinese economic data met expectations, cooling market fears of weakness in the world's second largest economy.

Fears of a Greek exit from the eurozone and the sharp correction in China's stock markets had seen selling in global equities.

China "doesn't look like it's going to fall off a cliff anytime soon and in the absence of that negative news people are feeling a bit more comfortable with getting back into the market", Smalley said.

Air New Zealand led the benchmark higher, up 6.3 per cent to $2.69. A2 Milk Co gained 4.1 per cent to 77c. Trade Me Group, the online auction site, advanced 2.2 per cent to $3.32. Casino operator SkyCity Entertainment Group rose 2 per cent to $4.19.

Pacific Edge, the Dunedin-based biotech firm, was the worst performer on the day, down 1.5 per cent to 65c.

Orion Health Group rose 2.3 per cent to $3.98 after the healthcare software firm said it was performing in line with its expectations.

The Auckland-based company held cash and short-term deposits of $96 million as at June 30, having generated $200,000 of operating cashflow in the three-month period.

Goodman Property Trust was unchanged at $1.23. The country's second-biggest listed property investor will build a new $26.8 million coolstore at its Highbrook Business Park site in Auckland.

Outside the benchmark index, PGG Wrightson was unchanged at 47c.