MARKET CLOSE: Shares close at new record as earnings season looms

New Zealand shares rose for a fourth day, closing at a new record, as a lack of profit warnings ahead of the earnings season reinforced confidence in a market that offers high dividend yields in a world of low interest rates. Heartland New Zealand led gainers.

The NZX 50 index advanced 12.275 points, or 0.2 percent, to 5797.594, taking its weekly gain to 0.9 percent. Within the index, 21 stocks increased, 18 stocks decreased and 11 were unchanged. Turnover was $123.7 million.

Companies start reporting their first-half and annual earnings next week, with engineering firm Opus International Consultants kicking off proceedings on Tuesday and SkyCity Entertainment Group the following day. Opus shares fell 2.9 percent to $1.36 and SkyCity increased 0.3 percent to $3.82. It then ramps up in the following two weeks with about 41 companies announcing their results.

Mark Lister, head of private wealth research at Craigs Investment Partners, said investors were reasonably comfortable with the upcoming earnings season, with just two profit warnings coming from retailers Warehouse Group and Kathmandu Holdings, which both firms blamed on soft Christmas trading.

"Markets are always a bit sheepish going into that period, but people are reasonably relaxed about earnings season," Lister said. "There's not a huge amount of expectation built in and we haven't seen too many negative profit announcements."

Shares of Kathmandu declined 0.7 percent to $1.39, while Warehouse fell 0.4 percent to $2.76. Jewellery chain Michael Hill International, which also reports next week, fell 1.7 percent to $1.16.

New Zealand's market remains a favourite among investors seeking a stable income, with interest rates expected to stay low through this year after the Reserve Bank of Australia this week cut its key rate and the New Zealand central bank dropped a bias towards hiking rates last week. That makes stocks with relatively high dividends an attractive investment compared to a term deposit.

"With interest rates staying on hold for the foreseeable future, that's keeping the market in vogue given we've got so many good dividend stocks on our market," Lister said.

Heartland rose 3.7 percent to $1.41, leading the benchmark index higher. The bank trades at a gross dividend yield of 6.13 percent. Spark New Zealand, which trades at a 6.6 percent yield, rose 0.9 percent to $3.49, and Sky Network Television, trading at 6.9 percent yield, increased 0.9 percent to $5.89.

Telecommunications network operator Chorus extended recent gains, rising 2.5 percent to $2.85, its highest level since September 2013.

Fisher & Paykel Healthcare, which derives about half its revenue in US dollars, rose 1.8 percent to $6.29 with recent weakness in the kiwi dollar boosting the value of its international sales. Air New Zealand, the national carrier, advanced 2 percent to $2.59.

A2 Milk Co, which markets milk with a protein variant said to have health benefits, was the biggest decliner on the day, falling 6.1 percent to 46 cents, the lowest since August 2012. The company derives most of its earnings in Australia, and the kiwi dollar's strength against the Australian currency erodes the firm's New Zealand dollar denominated earnings.

Guinness Peat Group, which owns UK threadmaker Coats, dropped 3.2 percent to 46 cents. Metlifecare, the retirement village operator, declined 2.3 percent to $4.69.

Fletcher Building, the biggest company on the stock market, fell 0.6 percent to $8.47.

(BusinessDesk)