MARKET CLOSE: Shares gain, Steel & Tube and Xero advance while NZ Refining drops

New Zealand shares gained as investors were buoyed by potential interest rate cuts, with Steel & Tube Holdings, Xero and Westpac Banking Corp gaining, while New Zealand Refining Co fell.

The S&P/NZX 50 Index rose 41.38 points, or 0.6%, to 7,214.05, another record high. Within the index, 32 stocks rose, nine fell and 10 were unchanged. Turnover was $155.4 million.

Grant Williamson, director at Hamilton Hindin Greene, said the Reserve Bank's indication it will move to cut interest rates has encouraged the market.

"Overall investors are still pretty positive, and with expected interest rate cuts we do see the higher yielding stocks come in for demand," Mr Williamson said. "Maybe even one or two investors are put off by the media talking about housing and how it's overpriced, people have got to put their money somewhere."

Steel & Tube Holdings led the index, up 4.5% to $2.11. It's recovered 11% in the past week, though is down 9.8% this year. Its share price has been depressed by a Commerce Commission investigation into the sale of "many thousands of sheets" of earthquake reinforcing mesh with certificates which wrongly used an independent laboratory's logo.

Xero rose 3.6% to $19.47. The software-as-a-service firm held its annual meeting in Sydney on Thursday, where chief executive Rod Drury told investors it will start offering new services as it seeks to transform the platform founded on accounting software into the online portal of choice for small businesses.

The banks rallied as major lenders clamped down on lending to property investors by requiring at least a 40% deposit ahead of Reserve Bank restrictions. Westpac Banking Group gained 2.5% to $32.85, Heartland Bank rose 1.5% to $1.33, and Australia & New Zealand Banking Group advanced 1.5% to $27.20.

Fletcher Building gained 1.1% to $9.24.

"We haven't seen these sorts of levels for a while; I think investors are expecting a pretty big uptick in the company's fortunes as the residential building in New Zealand is going to have to go up significantly to cover the housing shortage," Mr Williamson said.

New Zealand Refining was the worst performer, down 4.3% to $2.46. Deutsche Bank has cut its price target to NZ$3.05 from NZ$3.65.

"That drop follows some analysts downgrading the earnings potential going forward for the company," Mr Williamson said. "The company's fortunes lie with the refining margins, and a number of analysts are starting to say it could be the end of the good times in the short term."

The downgrades came after the refinery said it had a gross margin of $US6.26 per barrel in its throughput and margin report for May/June, at the top end of the range, while throughput for the period was 6.8 million barrels.

"The report was quite reasonable but some analysts are saying margins have now peaked, so it will be interesting to see if they're right or not," Mr Williamson said. "That share price went up pretty quickly and it's come back just as quickly – it rallied throughout 2015, and has come back in 2016 – but it is very much a cyclical stock and it can move pretty quickly both ways."

Nuplex dropped 0.6% to $5.26. The global resins maker says the planned A$1 billion takeover by Allnex is now not likely to take place in August as previously advised because of delays getting anti-trust clearance in the European Union.

(BusinessDesk)

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