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MARKET CLOSE: Shares fall on smaller RBNZ rate cut; Meridian, Contact decline

 S&P/NZX50 Index fell 26.45 points, or 0.4%, to 5901.3.

Suze Metherell
Thu, 23 Jul 2015

New Zealand shares fell from a record as investors looked to pocket recent gains after some were disappointed by a smaller interest rate cut than expected. Contact Energy and Meridian Energy fell.

The S&P/NZX50 Index fell 26.45 points, or 0.4%, to 5901.3. Within the index, 29 stocks fell, 15 rose and six were unchanged. Turnover was $107 million.

Investors sold equities after the Reserve Bank cut the official cash rate 25 basis points to 3%, a smaller cut than the 50 basis points some in the market had expected, which helped push the benchmark index to a fresh high yesterday. Commentary by governor Graeme Wheeler was also seen by some as slightly less "dovish" when he dropped his reference to the kiwi dollar being unjustifiably and unsustainably high – criteria which warrant intervention.

Stocks held for their high yield declined. Meridian fell 2.2% to $2.18. Contact declined 2% to $5.04. Spark New Zealand, formerly Telecom Corp, dropped 2% to $2.91. Mighty River Power slipped 1.4% to $2.80.

"It looks to be a profit-taking day and investors are using the excuse that it was only 25 points and the commentary was less dovish than they'd hoped to take a bit of money off the table," James Smalley, director at Hamilton Hindin Greene said. "He hasn't been more hawkish but less dovish and that has then perhaps led to a little bit of inverse correlation between interest rates and equity markets."

Heartland New Zealand, the listed bank, led the benchmark index lower, falling 2.5% to $1.19. Air New Zealand, the national carrier, declined 2.4% to $2.675.

Chorus, which has been tasked with the job of building the bulk of the ultrafast broadband infrastructure, fell 0.9% to $2.84. Finance Minister Bill English told a conference that the government doesn't want to spend any more money or stay any longer in the build of the UFB network for fear of distorting the telecommunications sector.

Vector, the Auckland lines company, declined 0.9% to $3.36. At the same conference Mr English flagged that lines companies are at risk of losing value as they're superseded by new technology.

Ebos Group was the best performer on the benchmark index climbing 2.8% to $11.

Outside the benchmark index, Comvita jumped 9.9% to a record $5. The Te Puke-based maker of health products based on manuka honey forecast a 35% gain in annual earnings, up from annual profit of $10.2 million in the year ended March 31. It also signalled chief executive Brett Hewlett will end a decade in charge of the company.

Livestock Improvement Corp, a farmer cooperative that sells bull semen and manages a dairy genetics database, was unchanged at $4.50 after it posted its third straight drop in annual profit as lower milk prices weighed on demand for its services and as it spent more on technology and infrastructure to be able to deliver new products to farmers. The Hamilton-based cooperative said net profit dropped to $13.7 million in the year through May, from $18 million in 2014.

PGG Wrightson, the rural services firm controlled by China's Agria Corp, rose 1.1% to 47c. It has agreed to buy the assets of Australian seed business Grainland Moree for an undisclosed amount.

Intueri Education Group advanced 6.9% to $1.70. New Zealand's largest private training college has agreed to buy the NZ Institute of Sport for $19.3 million to give it significant scale in the sports and complementary health sectors.

(BusinessDesk)

Suze Metherell
Thu, 23 Jul 2015
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MARKET CLOSE: Shares fall on smaller RBNZ rate cut; Meridian, Contact decline
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