New Zealand shares inched higher to a fresh record in mixed trading, with Air New Zealand and Fisher & Paykel Healthcare leading gains while Fonterra Shareholders Fund dipped on concerns the cooperative is overpaying for milk.
The S&P/NZX50 Index rose .87 points, or 0.01 percent, to 8,978.18. Within the index, 26 stocks fell, 12 rose and 12 were unchanged. Turnover was $182.8 million.
"The US gave up half a per cent late and Asian markets are, broadly speaking, down a bit, with the exception of the almighty New Zealand market which continues to be driven by a very narrow grouping of large-cap growth companies, in particular Fisher & Paykel Healthcare yet again leading the way," said Matt Goodson, managing director at Salt Funds Management.
Fisher & Paykel Healthcare rose 1.8 per cent to $15.01, a record high. The stock has gained 14 per cent since its earnings announcement in May, when it said it lifted 2018 annual profit to the top end of its forecast range and said it expects record earnings in the coming year as it benefits from growing global demand.
"There's no new news but very aggressive offshore buying despite a result which actually saw a few downgrades afterwards. At the moment investors appear to be willing to pay very aggressive prices indeed," Goodson said.
Air New Zealand led the index higher, up 2.4 per cent to $3.20. The airline told investors at a briefing in Auckland it still expects annual earnings to beat last year's result despite the squeeze from rising fuel costs, which it sees as an ongoing headwind into 2019.
"They're rebounding strongly from recent weakness following their strategy day - they're highlighting a few levers they have to deal with rising fuel prices such as price increases, being more cautious about future capacity growth and a reasonable hedging program they have in place," Goodson said.
Mercury New Zealand rose 1.5 per cent to $3.43. It has raised its earnings guidance for a fourth time as more rain around Taupo keeps the power company's North Island generation pumping out more electricity.
Tourism Holdings gained 1.1 percent to $6.74 and Port of Tauranga rose 1 percent to $5.17.
Synlait Milk was the worst performer, dropping 2.2 per cent to $10.55, with units in Fonterra Shareholders Fund down 1.8 per cent to $5.01.
The Commerce Commission said this morning it is concerned that the 'asset beta' Fonterra Cooperative Group uses to determine the farmgate milk price is too low, meaning it ends up paying its farmers a higher price for their milk than would be warranted under the company's enabling law.
"Clearly if they pay too high a milk price that's been hurting FSF unit holders, effectively the milk price is their input price," Goodson said. "The reality is Fonterra's earnings are similar to where they were a few years ago and they've spent many hundreds of millions of dollars of capex in the interim for no outcome."
Trustpower dropped 1.6 per cent to $5.73, Fletcher Building fell 1.3 per cent to $6.75, and Ebos Group declined 0.9 per cent to $18.73.
Outside the benchmark index, Scales Corp rose 0.4 per cent to $4.66. The company held its annual meeting in Christchurch yesterday.
It has agreed to sell its cold storage businesses Polarcold Stores and Whakatu Coldstores, which were merged on January 1 under the Polarcold brand, to Emergent Cold for $151.4m, subject to Overseas Investment Office approval.
"All eyes are really on what they do with their war chest post the sales, which areas they expand into. If you look across the Tasman to a company like Costa Group they've been incredibly strong as they've expanded aggressively into berries, mushrooms and avocados, so it will be interesting to see what Scales does," Goodson said.