MARKET CLOSE: NZ shares rise on outlook for low interest rates; Air NZ, Metlife, Ryman gain

New Zealand shares rose yesterday as the prospects of interest rates staying low drew investors to the equity market in search of better returns. Air New Zealand, Metlifecare and Ryman Healthcare gained.

The S&P/NZX 50 Index rose 30.04 points, or 0.4%, to 6970.99, an all-time high. Within the index, 31 stocks gained, 14 fell and five were unchanged. Turnover was a relatively modest $109 million, with no tailwind from US markets closed for Independence Day on Monday.

The yield on 10-year government bonds fell to a record-low of 2.315% yesterday and two-year term deposits are paying interest of just 3.39%, a meagre return compared to rates of above 4.7% on offer two years ago.

"There's still a lot of political uncertainty but people are ignoring that at the moment and the clearest thing coming through is that interest rates are likely to stay low," said Greg Easton, an adviser at Craigs Investment Partners. There's a more-than-even chance of a rate cut here in August and the income flow that this market offers is still attractive."

Mr Easton said that includes "mums and dads whose term deposits are rolling off and seeing rates on offer that are just not cutting it."

Air New Zealand advanced 1.9% to $2.15 and Auckland International Airport rose 1.1% to $6.82.

Meridian Energy rose 1.6% to $2.60. Metlifecare led gains among retirement village operators, rising 1.8% to $5.68. Summerset Group Holdings rose 1.8% to $4.59 and Ryman gained 1.3% to $9.40.

Heartland Bank rose 1.7% to $1.23, while Westpac Banking Corp fell 1% to $29.80 and Australia & New Zealand Banking Group declined 1.5% to $24.35.

Fonterra Shareholders' Fund gained 0.7% to $5.49 ahead of the GlobalDairyTrade auction overnight.

Chorus fell 1.7% to $4.27 while Spark edged up 0.1% to $3.56.

Port of Tauranga slipped 0.3% to $19.78. Chairman David Pilkington today said his company's shareholders would take some convincing that building a new "super-port" at the Firth of Thames or Manukau Harbour to serve the upper North Island would be a good move. The super-port suggestion was included in the Port Future Study released last week, which found rival Ports of Auckland is likely to need to move from its current Auckland waterfront site and in the interim needs to have extra berth space.

Colonial Motor Co rose 3.2% to $6.40 after the motor vehicle distributor said it expects to post a record profit in 2016 on strong sales of Fords and Mazdas. Profit would exceed the $16.3 million it posted in 2015 and its previous record of $19.3 million a year earlier.

"The new vehicle industry in which we operate has achieved all-time record levels and, in the first six months of this calendar year, new vehicle sales have grown by 5% over the comparable period of the previous year," chairman Jim Gibbons said.

(BusinessDesk)