MARKET CLOSE: Shares gain on hunt for yield

New Zealand shares rose, paced by Meridian Energy and MightyRiverPower, as investors chased stocks with relatively attractive yields. Fonterra Shareholders' Fund gained after dairy prices fell. 

The NZX 50 Index rose 17.028 points, or 0.3 percent, to a record close of 5522.056. Within the index, 23 stocks rose, 16 fell and 11 were unchanged. Turnover was $121 million. 

The benchmark index has gained 16 percent since the start of the year, and is being pushed higher by investor's appetite for yield in a low interest rate environment. Earnings from companies with September balance dates have generally met expectations, which is underpinning the market, investors said.

"We do have the double-blessed environment of good quality results that have meet or slightly beat expectations as well as remaining relatively attractive from an income yield perspective," said Shane Solly, a fund manager at Harbour Asset Management. "Our market is relatively fully priced and certainly that can be resolved by way of earnings growth."

Energy companies, which are often held for their reliable income, gained. Meridian climbed 3.5 percent to $1.775. MRP advanced 3.3 percent to $3.095. Genesis Energy rose 0.2 percent to $2.185. Contact Energy gained 0.2 percent to $6.25. 

Spark New Zealand, formerly Telecom Corp, slipped 0.6 percent to $3.225. The telecommunications business, held for its yield, has overtaken Fletcher Building to become the largest company on the benchmark index by market cap. Fletcher, the construction company, fell 0.6 percent to $8.40. 

"Investors have lost some of their enthusiasm for Fletcher Building, particularly the nature of their Australian assets, and their stock price has fallen as a result," Solly said. "In the meantime we've seen Spark benefit from the hunger for income yield which it provides."

Units in Fonterra Shareholders' Fund rose 0.5 percent to $6.20. Overnight dairy product prices fell in the GlobalDairyTrade auction to the lowest level in more than five years, led by declines in rennet casein, skim milk powder and whole milk powder, while butter and cheese prices rose. The units give holders access to Fonterra Cooperative Group's dividend stream. 

"Things like whole milk powder and skim milk powder reduces the input costs for Fonterra, but things like butter and cheese holding up relatively well means they should get an improvement in margins in the near term," Solly said. "There's two key parts to the business - there's the processing component, which is driven by volume which continues to grow, and then the other part is very much the consumer or finished products part which are sold wholesale to food producers."

OceanaGold Corp led the benchmark index higher, gaining 6.3 percent to $2.70. The Melbourne-based miner has been scaling back its New Zealand gold mining production as it focuses on its copper and gold production in the Philippines, at its Didipio mine.

"Oceana has come out with some reasonable statements in recent times about what they’ve got in their Philippine Didipio assets," Solly said. "People can see some upside and potential out of those assets relative to other gold producers."

Argosy Property Fund rose 0.5 percent to $1.06 after lifted first-half earnings 25 percent to $37.6 million in the six months ended Sept. 30, as its occupancy rate increased and it continued to divest non-core assets.

Outside the benchmark index, AWF Group rose 0.4 percent to 2.57. The contract labour firm that last year took on debt to acquire white-collar recruiter Madison, will probably launch a $12 million rights offer next year to reduce its borrowings and put some money in the kitty for potential future acquisitions.

Sanford was unchanged at $5.20 and has gained 12 percent since the start of the year. New Zealand's largest listed fishing group lifted annual profit 10 percent to $22.4 million as gains in its deepwater fishing and aquaculture offset falling skipjack tuna prices.

SeaDragon rose 4.6 percent to 2.3 cents. The fishoil manufacturer turned to a loss of $574,000 in the six months ended Sept. 30, from a profit of $219,000 a year earlier, as it continued to have difficulties in securing sufficient raw material for its core Squalene operations and the resulting under utilisation of the company’s refining facilities. 

On the NZAX, Moa Group rose 2.3 percent to 44 cents after the unprofitable boutique beer maker widened its first-half loss to $3.21 million, from $3.02 million a year earlier, as it restructured its fledgling business and changed distribution and brewing arrangements to underpin future growth.