MARKET CLOSE: Shares fall led by growth stocks; Xero drops to 9-month low

New Zealand shares edged lower as investors shunned growth-orientated stocks in favour of companies offering a steady yield, led by accounting software developer Xero.

The NZX 50 Index fell 1.857 points, or 0.04 percent, to 5112.386. Within the index, 18 stocks fell, 19 rose and 13 were unchanged. Turnover was $118.8 million.

Investors sought companies which offer a yield over growth-orientated stocks, which have fallen out of favour in recent months after making big gains in the first quarter of the year as analysts question their high valuations relative to earnings ahead of next month's reporting season when they will get a steer on how firms are tracking.

Xero fell 4.7 percent to $24.50, its lowest since October, and led the benchmark index lower. A2 Milk slipped 1.5 percent to 67 cents and Diligent Board Members Services declined 1.2 percent to $4.11. Pacific Edge, the Dunedin-based biotech company, was unchanged at 75 cents. None of those companies pay dividends.

Companies offering steady dividends paced gainers, with electricity generator-retailers MightyRiverPower and Genesis Energy both up 1.1 percent to $2.29 and $1.83 respectively.

"Yield is still the thematic choice of the moment in the market, and the growth stocks are the ones that have tended to come under pressure," said Rickey Ward, NZ equities manager at JBWere Equities New Zealand. "I think everyone has been scratching their heads for quite some time as to the multiples you're paying for the market, so they're waiting for earnings to justify those multiples."

A flurry of upcoming listings is also eating into investors' demand for growth stocks, with recent listings of software developers Gentrack Group and Serko and the upcoming floats of IkeGPS Group, which sells a range of portable measuring devices, and Vista Group International, which is selling shares at $2.35 apiece, widening the stocks on offer.

Outside the benchmark index, SLI Systems, the search engine software developer, rose 3.7 percent to $1.40 after falling to an intraday record-low of $1.25. Serko fell 1.1 percent to 93 cents, below its sale price of $1.10 while Gentrack was unchanged at $2.55.

"There's more choice but also I think some of these stocks were too highly priced to start with and there was a bit of excitement and frenzy around it and now there's a little bit of a hangover from the excitement around these stocks which has clearly come off," said Paul Harrison, who helps manage $650 million of equities and property holdings for Salt Funds Management. "The stocks that have lots of blue sky in them are suffering after struggling to convince people that the blue sky is there at the moment."

Port of Tauranga rose 1.6 percent to $15.75, extending yesterday's gains on news global shipping line Maersk will rotate its Southern Star service through the port, adding 70,000 containers to cross the wharves every year.

Infratil rose 0.4 percent to $2.45. The Wellington-based infarstructure investor is reviewing its Australian-based energy assets, and expects to decide in September. Today Brisbane-based ERM Power said in a statement to the ASX that it's not involved in the sale process for Infratil's electricity retailer Lumo.

Fletcher Building rose 0.3 percent to $8.91. Telecom Corp climbed 0.4 percent to $2.775. Auckland International Airport increased 0.1 percent to $3.805.

Kathmandu Holdings, the outdoor equipment chain, was the benchmark index's best performer, climbing 2.7 percent to a month-high of $3.39. Today's ANZ-Roy Morgan consumer confidence index rose for the second consecutive month. Warehouse Group, the country's biggest listed retailer, increased 0.3 percent to $3.07.

(BusinessDesk)

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