NZ shares gain; A2 Milk continues stellar run

A2 Milk gained 22 cents, or 1.5 per cent. Photo / File

New Zealand shares rallied into the 10th anniversary of the longest bull market in share market history, gaining 0.9 per cent this week after central banks around the world indicate interest rates will remain low and might go even lower.

The benchmark S&P/NZX 50 Index gained 2.91 points, or 0.3 per cent, to 9440.27 today. Within the index, 22 shares rose, 8 were unchanged and 20 fell with turnover at $149.2 million.

Greg Smith, head of research at Fat Prophets, says that in a low interest rate environment, "higher income stocks are going to be even more in favour."

The European Central Bank was the latest to abruptly change gears, downgrading its growth forecast for the euro area overnight New Zealand time to 1.1 per cent for this year, down from its previous forecast of 1.7 per cent.

"The gentailers (electricity generators and retailers) are certainly in demand" because of their strong dividend yields, Smith says. Mercury New Zealand gained 3.5 cents, or 1 per cent, to $3.69 while Contact Energy climbed 3 cents, or 0.5 per cent, to $6.42.

Among other high yielding stocks to benefit from falling interest rates, Auckland International Airport gained 6 cents, or 0.8 per cent, to $7.69, Vector advanced 4 cents, or 1.1 per cent, to $3.52 and Chorus rose 7 cents, or 1.3 per cent, to $5.49.

Spark was a major exception, its shares falling 7 cents, or 1.9 per cent, to $3.70 and it was the most heavily traded stock with 8.1 million shares changing hands, up from the 4.65 million daily average over the last 90 days.

Smith says investors are still disappointed with Spark's 5.6 per cent drop in first-half net profit, even though the telecommunications company is paying a 1.5 cent special dividend on top of its 11 cent ordinary dividend.

Chorus was the second-most heavily traded with 2.5 million shares sold today.

A2 Milk continues its stellar run, gaining 22 cents, or 1.5 per cent, to $14.72 today, although that's a little down from the record $15 reached earlier this week.

A2 shares have gained more than 32 per cent year-to-date compared with the Top 50's 7.1 percent gain and its 55 per cent jump in first-half net profit certainly didn't hurt.

"It was obviously a very good result and it's doing a lot better than many competitors," Smith says.

A2's performance over the last few years has been propelled by the success of its infant formula sales in China.

"The markets are largely pricing in a resolution" to the trade war between the US and China and certainly there have been no signs yet that A2 has been affected, Smith says.

"But also with A2, you've got an emerging US story as well," he says.

A2 is now selling fresh milk in more than 12,400 stories in the US where first-half revenue more than doubled.

Sky Network Television was the day's biggest gainer, its shares rising 3 cents, or 2.3 per cent, to $1.33, but they're still down more than 28 per cent year to date as investors worry about new technologies eroding its franchise.

"That's possibly a bit of a rebound with bargain hunters coming in," Smith says, adding that Sky's new chief executive, Martin Stewart, has a big task ahead of him.

It was the opposite story with cinema technology company Vista Group which was the day's biggest decliner, sinking 13.9 cents, or 2.9 per cent, to $4 on trading of 207,544 shares. The last time more than 200,000 shares changed hands in one day was last December.

It wowed investors last week with its 26.7 per cent jump in first-half net profit and the shares are still up 4.7 per cent since the announcement.