MARKET CLOSE: Shares gain led by Chorus; Fonterra fund rises on lower milk price

New Zealand shares rose led by Chorus as investors mull the impact of the proposed regulated price on the network operator's copper lines, while Spark New Zealand extended its decline on the prospect higher costs. Fonterra Shareholders' Fund gained on falling global dairy prices.

The NZX 50 Index rose 73.031 points, or 1.3 percent, to 5503.066. Within the index, 40 stocks rose, seven fell and three were unchanged. Turnover was $174 million.

Chorus, which suspended dividends to mitigate against a cut to its copper line pricing and the funding of the country's ultrafast broadband roll out, climbed 9.2 percent to a 14-month high of $2.74, adding to a 17 percent jump yesterday after the Commerce Commission's draft ruling for regulated pricing on the company's copper network won't impose as steep a cut as previously indicated. Chorus said the new pricing would slash annual earnings by $80 million, less than half of the $170 million hit it had projected until current pricing.

"Chorus is clearly firmer on the back of the expectation they get a big benefit from the final draft pricing principle, clearly they still are gaining support," said Rickey Ward, NZ equity manager at JB Were New Zealand Equities. "You almost get the feeling the local market didn't own a lot of them, so now there's been an element of confirmation around it, they're investing into it, or foreign investors coming into a company which could likely pay a dividend now."

Spark, formerly Telecom Corp, was one of the day's few decliners dropping 1.8 percent to $2.97, adding to yesterday's 3 percent drop. The telecommunications provider is the biggest customer for Chorus and said yesterday that the draft determination could drive up its costs by $60 million a year and hurt earnings, although it was too soon to revise guidance for low single digit growth in adjusted earnings before interest tax, depreciation and amortisation from 2014's $936 million.

Units in Fonterra Shareholders' Fund climbed 1.3 percent to $6.10. Overnight dairy product prices slipped to a fresh five-year low in the latest fortnightly auction, because of a drop in whole milk powder, adding to speculation Fonterra Cooperative Group, the world's largest dairy exporter, will cut its farm gate milk payout to farmers below its current forecast $5.30 per kg milksolids next week. Units give holders access to Fonterra's dividend stream, and a lower payout means wider margins for the cooperative.

"The lower farm gate price is seeing the share price gain on reasonable volume," Ward said. "Now people are suggesting the company will come out and revise prior forecast for the farm gate price from $5.30 to below $5 and there's probably enough information and justification for that to occur now."

Summerset Group Holdings was unchanged at $2.35 after the retirement village operator said it has been granted resource consent for its $80 million Wigram village, its first in Christchurch.

NZX rose 0.8 percent to $1.22. According to its monthly metrics, the volume and value of cash trading on New Zealand's stock exchange fell in November from a year earlier, with activity down across the board.

Tower, the general insurer, climbed 4.1 percent to $2.05. Freightways, the logistics and courier company, gained 3.8 percent to $5.70. Kathmandu Holdings, the outdoor goods retailer, rose 3.8 percent to $3.02. SkyCity Entertainment Group advanced 3.3 percent to $4.05.

OceanaGold Corp was the worst performer on the benchmark index, dropping 2.5 percent to $2.35.

Outside the benchmark index, Finzsoft Solutions surged 24 percent to a record $5.20 after the financial software developer reported a profitable first half on Friday, and said its board is considering paying an interim dividend for the first time in four years.

(BusinessDesk)