MARKET CLOSE NZ shares gain as Xero surge continues

New Zealand stocks gained again, led by accounting software global pretender Xero and supported by Fletcher Building reaffirming profit expectations for this year, with a little upside.

The NZX50 Index of leading stocks rose 10.846 points, or 0.228 percent to 4,758.771. Within the index, 19 stocks rose, 19 fell and 12 were unchanged. Turnover was $110 million.

Xero led the pack, putting on7.4 percent to close at a new high of $22.10, having only pushed through the $20 mark yesterday, taking its market capitalisation to $2.6 billion, just pipping the $2.59 billion market cap of Auckland network operator Vector, to be the seventh largest NZX-listed stock by market capitalisation.

The run-up from $17.95 last week follows the $180 million capital-raising announced for Xero this week, involving long term US heavyweight tech sector investors, and supported by some New Zealand money, including $16 million from KiwiSaver provider Milford Asset Management.

"They've got a runway in terms of the money," said James Lee, head of institutional equities at First NZ Capital in Auckland. "There's just an increased belief that it's possible they can do what they've set out to do."

The company has around 211,000 customers for its cloud accountancy package and is seeking a million customers globally as it competes with other global and regional providers, such as MYOB. Xero shares have risen 313.1 percent in the last year.

Fletcher Building shares rose 1.4 percent to $9.53 after shareholders were told at the annual meeting in Auckland that forecast earnings in the current financial year, before interest and tax, would come in between $610 million and $650 million, with no improvement in Australia and weak trading compounded by a strong kiwi dollar.

"They reaffirmed their goals," said Lee.

With its share price falling precipitously in recent days, Diligent Board Member Services, the governance software purveyor suffering governance problems of its own, has provided Accident Compensation Corp's fund managers a buying opportunity. A substantial security holder notice for Diligent shows ACC has taken its stake from 7.4 percent to 8.5 percent. Diligent shares stabilised at $4.18, up 0.7 percent on the day, but have fallen from $5.65 on Oct. 10.

Elsewhere, retail and aviation stocks appeared to perform better than traditional blue-chips today, with continued weakness in the price of electricity company shares. Michael Hill International was the second strongest gainer, up 2 percent to $1.50, and Auckland International Airport up 0.9 percent to $3.36.

Contact Energy, the largest listed electricity generator-retailer, was the biggest loser on the day, down 2.3 percent at $5.20 after yesterday's annual meeting gave no news on capital returns ahead of next week's Meridian Energy partial privatisation.

"You've got the Meridian float sitting over the market," said Lee, referring to next week's institutional bookbuild for the Meridian float. "Everyone wants to get that done as cheaply as possible, so that's going to weigh on the sector."

Added to that was concern at the potential switch to a central buyer electricity policy if a Labour-Green coalition government emerges next year, cutting electricity company profits.

"You're just not seeing any confidence in that sector."

New Zealand Oil & Gas fell 1.8 percent to 82.5 cents as investors continue to ignore its low-cost acquisition of an increased share of the Tui oil field and a preliminary hydrocarbon discovery in Indonesia last week.

(BusinessDesk)