China's new three-child policy may have just given a2 Milk and Synlait a timely boost as their prices rebounded on an improving New Zealand sharemarket.
The S&P/NZX 50 Index recorded a significant gain for the second day running, closing at 12,462.47 – up 141.75 points or 1.15 per cent, following its Monday 1.14 per cent rise.
There were 81 gainers and 63 decliners over the whole market, with 60.1 million shares worth $171.88 million changing hands.
Synlait, unaffected by the flooding in Canterbury, rose 24c or 8 per cent to $3.24, and its main customer a2 Milk, which relies on exports to China, was up 19c or 3.24 per cent to $6.05.
On Monday, the Chinese government announced that married couples can have three children, up from two, and it will provide support for education and child rearing. The move comes after a recent census showed a rise in the percentage of Chinese aged 60 and above.
Dan Stratful, investment adviser with Forsyth Barr, said the talk on the market was that the third-child policy would give a2 Milk and Synlait a lift. The new policy will send the China population over 2 billion quite quickly.
"Finally, some good news is coming through for a2 Milk and Synlait, from a long-term investment point of view. China has an ageing population and will be running out of workers. The demographic trend is working in the New Zealand companies' favour. It's early days of course and we will see how it plays out," he said.
Synlait also told the market that its Dunsandel plant met Foodstuffs South Island deliveries despite flooding in the region, and normal operations have now resumed.
Stratful said the local market is now trying to recover its high ground after spending most of May on the decline. "It may take a while to get back to that January high, mind you."
Three stocks set new highs. Ebos Group put on 40c to $33.60; Freightways broke through the $12 mark after rising 25c or 2.12 per cent to $12.05; and online travel provider Serko climbed 24c or 3.42 per cent to $7.25 – its previous high was $7.01 achieved on March 29.
Market leader Fisher and Paykel Healthcare had a late rebound, finishing up 31c to $30.10 on trade worth $22.17m after falling to an intraday low of $29.39.
Mainfreight was up 37c to $76.25; Auckland International Airport rose 13c or 1.78 per cent to $7.42; Chorus gained 8c to $6.37; and Spark increased 6c to $4.59.
The energy companies were again strong. Contact was up 11c to $7.99; Mercury rose 24.5c or 3.74 cent to $6.80; and Meridian gained 12c or 2.29 per cent to $5.35.
Meridian confirmed that the suspension of the 50MWh per hour Potline 4 contract between Meridian and New Zealand Aluminium Smelters has been extended up to and including October 31.
Retirement village operators Summerset Group Holdings increased 25c or 2 per cent to $12.75; Ryman Healthcare was up 19c to $13.30; Arvida Group gained 1.5c to $1.85; and Oceania Healthcare increased 3c or 2.14 per cent to $1.43.
Stratful said Oceania and possibly Arvida might outperform Ryman in the short term. "They are showing faster growth at the moment. Ryman is further along the growth path, and Oceania and Arvida are growing at a pace that Ryman was at a few years ago."
Other gainers were Sanford, rising 15c or 3.13 per cent to $4.95; Scales Corporation increasing 12c or 2.6 per cent to $4.74; Third Age Health Services up 10c or 4.33 per cent to $2.41; Cannasouth, subject to a market price enquiry, picking up a further 2.5c or 5.38 per cent to 49c; and Geneva Finance gaining 4.5c or 7.56 per cent to 64c.
NZX lost 5c or 2.36 per cent to $2.07; and kiwifruit grower and packer Seeka fell 15c or 3 per cent to $4.85.
Online customer engagement provider, Plexure Group, increased 5c or 6.67 per cent to 80c after announcing it has partnered with quick-service restaurant operator Pita Pit NZ.
New Zealand Rural Land Company confirmed it has settled the purchase of a 456ha dairy farm in Mokoreta, Southland for $10.245m, and has been leased to Fortuna Group for a rental of $515,667 per year, representing a 5.03 per cent yield. Rural Land's share price was unchanged at $1.13.
Software company ikeGPS reported revenue of $9.32m and a loss of $7.36m for the year ending March, but in the past 20 weeks has closed nearly $9m worth of new contracts. It share price slipped 1c to $1.06.