New Zealand shares gained as growing expectations of lower interest rates stoked demand for companies offering regular dividend income, such as Chorus and Meridian Energy. Dairy companies A2 Milk Co and Synlait Milk were boosted by stronger demand for dairy products.
The S&P/NZX 50 index rose 59.79 points, or 0.7 per cent, to 9,133.51. Within the index, 27 stocks gained, 14 fell and nine were unchanged. Turnover was $116.9 million.
Stocks across Australia and New Zealand gained as investors increased their bets on both central banks cutting interest rates, boosting the attraction of equities over fixed-income assets such as bonds and term deposits.
Reserve Bank of Australia governor Philip Lowe yesterday opened the door to a rate cut in a speech, while weaker than expected jobs data reignited speculation New Zealand's central bank will lean towards a cut. The S&P/ASX 200 index was up 1.3 per cent in afternoon trading.
"The share market loves low interest rates - the cost of capital is cheaper and also investors look for stocks when rates are low," said Peter McIntyre, an investment adviser at Craigs Investment Partners.
Utilities companies have been a favourite for investors in the low rate environment of the past decade, offering a relatively secure income stream and low equity risk. Chorus rose 2.3 per cent to $5.04 with 847,000 shares changing hands, twice its average volume. Meridian gained 2 per cent at $3.65, a record close, on 1.1 million shares.
Synlait led the market higher, up 5.4 per cent at $9.70 on a very light volume. A2 rose 2.6 per cent to $13.20 on a volume of 1.1 million, in line with its 90-day average.
Dairy prices rose 6.7 per cent at the Global Dairy Trade auction overnight. McIntyre said that gain would typically be negative for downstream companies such as A2 and Synlait, but the strong level for demand from Asian buyers was a bigger positive.
Fonterra Shareholders' Fund units, which give investors exposure to Fonterra's earnings, fell 0.9 per cent to $4.69 on half its average volume. Fonterra's shares, which trade on a closed market, were also down 0.9 per cent at $4.69 in light trading.
Fisher & Paykel Healthcare gained 3.4 per cent to $13.26 on a volume of 839,000, compared to its 670,000 average. F&P Healthcare generates half its revenue in US dollars, and benefits when the local currency declines. The kiwi dropped more than half a US cent after weaker than expected jobs data was seen as boosting the chance of a rate cut.
Spark New Zealand was the most active stock, with 3.3 million shares changing hands. It fell 1.5 per cent to $4.03. Z Energy rose 0.2 per cent on a volume of 1.3 million, while Sky Network Television dropped 1 per cent to $1.92 on a volume of 1.2 million, twice its average volume.
Of other companies trading on volumes of more than a million shares, Auckland International Airport edged up 0.1 per cent to $7.37, and Fletcher Building was unchanged at $5.04.
Pushpay Holdings fell 3.1 per cent to $3.44 on a volume of 837,000, more than twice its average. The payments software developer today reported a 35 percent increase in December quarter revenue to US$27.7m and said it should deliver a substantial profit in the March year.
McIntyre said the company had already set investor expectations for a strong performance in a January update.
NZX fell 3 per cent to 99 cents on very light volumes. The stock market operator's monthly metrics showed a decline in activity in January, with less trading going through the formal market in what's typically a holiday-affected month.
Outside the benchmark index, Orion Health Group rose 5.2 per cent to $1.21. Founder Ian McCrae today announced plans to mop-up the remaining shares, launching a takeover bid with a handful of other investors who collectively own more than the 90 per cent needed to force a sale. The consortium will offer $1.224 a share, matching a buyback price accepted by most investors.