MARKET CLOSE: NZX 50 reaches record high before earnings; ANZ, Mercury, Ebos gain

New Zealand shares rose yesterday, pushing the S&P/NZX 50 Index to a new record on optimism the lack of profit warnings running into earnings season means companies are less likely to disappoint the market. Australia & New Zealand Banking Group, Westpac Banking Corp, Mercury NZ and Ebos Group led gainers.

The NZX 50 rose 14.86 points, or 0.2%, to 7363.16, bringing its gain this year to more than 16%. Within the index, 23 stocks rose, 20 fell and eight were unchanged. Turnover was $122 million.

ANZ Bank rose 2.8% to $28.27 on the NZX, mirroring its gains on the ASX, where its shares reached a seven-month high after the lender increased capital and said it didn't expect a blow-out in expenses for bad debts. Westpac rose 1.7% to $33.14. Heartland Bank fell 1.4% to $1.38.

Mercury gained 2.7% to $3.10, leading gains among energy-related companies. Genesis Energy rose 0.9% to $2.29 and Meridian Energy advanced 0.9% to $2.92. NZ Refining gained 1.2% to $2.58 and TrustPower rose 0.6% to $8.22. Infratil, which has a controlling stake in TrustPower, rose 0.2% to $3.385.

Stocks in the NZX 50 are currently trading at an average price-earnings ratio of 20, suggesting investors are bullish about the outlook. David Price, a broker at Forsyth Barr, says his firm sees "double-digit growth looking through next year."

"So we will need slightly more positive outlook statements to justify where the market is," he said. "Historically, the multiples we're trading at now appear expensive." New Zealand equities continue to be one of the world's strongest-performing markets and that has underpinned offshore demand, especially for larger stocks, he said.

Kathmandu extended its gains, rising 1.6% to $1.96. Last week, the retailer said its annual profit rose as much as 67% on fatter margins. Net profit was between $33 million and $34 million in the 12 months ended July 31, up from $20.4 million a year earlier.

Property for Industry gained 0.6% to $1.67 after announcing that first-half distributable earnings 17% as lower interest rates helped cut costs and lease reviews and new purchases lifted rental income.

PGG Wrightson fell 5.6% to 51c  after the rural services firm controlled by New York Stock Exchange-listed Agria Corp, posted a 20% gain in full-year profit, largely by paying less tax, while a weaker dairy sector contributed to a decline in sales.

Trade Me Group was the biggest decliner on the NZX 50, falling about 2% to $4.92, and Orion Health Group dropped 1.5% to $4.70.

BusinessDesk

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