NZ shares rise as investor FOMO stokes demand for beat-up stocks

New Zealand shares rose for a third day. Photo / File

New Zealand shares rose for a third day as investors hoping to join the recent rally continued to buy into stocks impacted by the pandemic. Air New Zealand led the market higher.

The S&P/NZX 50 Index advanced 63.25 points, or 0.6 per cent, to 10,473.19. Within the index, 27 stocks rose, 20 fell and three were unchanged. Turnover was $346.9 million.

The local benchmark hit its highest point since March 12 as investors switched from selling stocks at record low prices to buying back into those companies with hopes of a full market recovery.

Matthew Goodson, managing director at Salt Funds Management, said it was a remarkable switch in the absence of an economic turnaround or improvement in earnings outlook.

"We had absolute panic in late March, a market where it was 'get me out at any price'. Now it's a FOMO market, which appears to be driven by a fear of missing out," he said.

Goodson said despite earnings downgrades and a flurry of equity raisings, retail investors were willing to buy in on the hope of a "rosier picture in a couple of years."

The tension in the market stemmed from central banks pumping money into financial markets, boosting investor confidence even as earnings drop.

"On the earnings data we track, the market is more expensive that it has ever been, because earnings have fallen further than the market has and there are further downsides yet," Goodson said.

Air New Zealand led the market higher, advancing 11.4 per cent to $1.315.

Goodson said the rise was difficult to understand given the airline had little revenue and owed a large debt to the government.

"If that's called on, equity holders will be heavily diluted. It is not the rescue some people are perceiving it as. It is a rescue for the business, not for the owners of the business," Goodson said.

Auckland International Airport fell 0.7 per cent to $5.95 after reporting passenger numbers had fallen 42 per cent in March and warning the April numbers would be even worse due to the national lockdown.

Tourism Holdings increased 3.3 per cent to $1.24 and SkyCity Entertainment Group rose 1.3 per cent to $2.29.

Goodson said some companies that were hit by the virus outbreak still had weak balance sheets and questioned if they were in "robust enough shape to get to the other side of the abyss".

Refining NZ gained 5.1 per cent to $1.04 as investors continued to process the news of its strategic review. Goodson said although refining margins were under enormous pressure due to demand collapsing, the refinery owns a valuable piece of infrastructure in the Wiri pipeline which delivers fuel to Auckland.

"I think the existence of the review has focused people's attention on valuing the infrastructure that NZR does own," he said.

Fuel retailer Z Energy, which owns a stake in the refinery, declined 0.3 per cent to $3.09.

Mainfreight increased 4.6 per cent to $38 and Freightways advanced 2.6 per cent to $6.70.

Securities exchange operator NZX rose 5.6 per cent to $1.33.

Vista Group International today announced plans to raise $65m at $1.05 per share. The shares last traded at $1.40 before trading was halted.

"Vista's global cinema industry customer base has been exceptionally hard hit at present, so they are raising to make sure they have sufficient funds to get through to the other side," Goodson said.

Mercury NZ posted the day's biggest decline, falling 5.9 per cent to $4.30.

Outside the benchmark index, NZME rose 9.5 per cent to 23 cents. The government is expected to announce short-term supports for the media sector within the next week.