MARKET CLOSE: NZ shares rise as rate cut stokes demand for yield stocks; Meridian, Contact, Kathmandu gain

New Zealand shares rose as high-yielding stocks became more attractive following yesterday's interest rate cut by the Reserve Bank, with Meridian Energy, Contact Energy and Steel & Tube Holdings all advancing.

The S&P/NZX50 Index gained 29.39 points, or 0.49 percent, to 6069.95. Within the index, 30 stocks rose, 17 fell and three were unchanged. Turnover was $165.9 million.

The Reserve Bank yesterday lowered the benchmark interest rate to a record-low 2.5 percent, ending its current cutting cycle, and reducing the appeal of fixed interest investments, such as bank term deposits.

"Yields are underpinning our market at the moment," said James Smalley, director at Hamilton Hindin Greene. "Obviously the big news in general this week was the rate cut, and to a degree it makes high-yielding stocks look even more attractive to people looking for income than they previously were."

Meridian led the market higher, up 3.3 percent to $2.325, and has a 5.3 percent yield. Contact, which has a 16.5 percent yield, rose 2.6 percent to $4.72, and Steel &Tube, with an 8.8 percent yield, rose 1.9 percent to $2.20.

Kathmandu Holdings rose 3.3 percent to $1.59. The outdoor clothing retailer had to fend off an opportunist and unsuccessful takeover offer from Briscoe Group in June when its shares tumbled to a record low.

"One thing with low commodity prices, and low oil prices, is it will be adding to discretionary income so retailers should be doing alright," Smalley said. "Maybe investors are hoping the worst is over. There was a spike on the Briscoes attempted takeover, and there have been several sell offs, but Kathmandu has managed to hold itself up."

Hallenstein Glasson, the clothing retailer outside the benchmark index, gained 1.2 percent to $3.28. Jewellery chain Michael Hill International rose 1.1 percent to 95 cents.

Orion Health Group was the biggest decliner today, dropping 2.8 percent to $3.15, an all-time low. The stock has fallen 17 percent since Nov. 25, when it announced a wider first-half loss of $26.9 million.

Heartland New Zealand rose 0.8 percent to $1.34. The locally listed bank affirmed annual earnings guidance, and said it's keen on buying rivals to grow its business, especially in consumer finance.

Precinct Properties New Zealand was unchanged at $1.25. The country's third-biggest listed property investor by market value will go ahead with a planned $681 million development in downtown Auckland, including a 39-storey waterfront office tower and retail centre, using funds from a newly established banking facility.

Outside the benchmark index, Wynyard Group rose 1.6 percent to $1.97, a near-10 month high. Shareholders passed a resolution to raise at least $30 million from a number of strategic investors to enable the security software firm to cash in on increased demand for ways to combat cyber, terrorist, and organised and transnational crime.

Scales Corp rose 6.6 percent to a record $2.43. The country's biggest apple exporter will pay a bigger dividend to shareholders after again raising annual earnings guidance as a record apple crop drove its horticulture unit, but said it wasn't likely to be repeated in 2016.

(BusinessDesk)