MARKET CLOSE: NZ shares rise on 'random order flow'

Thursday 29 December 2016 05:31 PM

MARKET CLOSE: NZ shares rise on 'random order flow', Hellaby up

By Sophie Boot

Dec. 29 (BusinessDesk) - New Zealand shares rose on light volume, with A2 Milk Co, Z Energy and Air New Zealand all gaining, while Freightways dropped.

The S&P/NZX 50 Index edged up 16.49 points, or 0.2 percent, to 6,892.28. Within the index, 32 stocks rose, 11 fell and seven were unchanged. Turnover was light at $65.8 million.

"It's a series of price moves driven by the existence of an order or not in a market that's pretty illiquid today," said Matt Goodson, managing director at Salt Funds Management. "You have the odd counter-intuitive move, our market's up fractionally despite quite a weak lead from the US. Really it's just random order flow in the market driving a few things around."

A2 led the index, up 2.4 percent to $2.12. The milk marketer's shares have been dragged this month after Australian rival Bellamy's was placed in a trading halt but began recovering when it gave a market update on Dec. 21.

"Bellamy's has been a reminder of some of the risks in the sector though it appears to be more a case of supply contracts causing their trouble, and A2's in quite a different situation, but those issues have put a bit of a lid on A2," Goodson said. "It's an interesting stock; it's certainly been very volatile over the last twelve months, reacting very sharply to both perceived good news and bad news."

Z Energy gained 2.4 percent to $7.22.

"It did get sold off a few days ago on the entry of Caltex Australia purchasing Gull. The thought process was someone with very deep pockets, enough to maybe fund their own infrastructure, would be a stronger competitor," Goodson said. "I guess the counterview would be that it's someone who knows how to maintain price discipline in the market, and since then we've seen BP pay what seems to be a very aggressive price for Woolworths in Australia, and people are looking at that so Z's bounced a bit in the last day or two."

Air New Zealand rose 2.4 percent to $2.17. It has dropped 20 percent this year, though the shares have rallied since the two-year low of $1.715 it reached in October.

"It's been very strong over a number of weeks which has been interesting - despite oil price increases, despite yield pressure in recent passenger stats and despite a plethora of international competition, whether that stays around in the long term remains to be seen," Goodson said. "The stock did bounce from a level that was relatively inexpensive on an earnings basis, but for an airline when there's so much operational and financial leverage in a company, earnings can move around very quickly as we've seen over the years from this business."

Freightways was down 1.9 percent to $6.71, while Spark New Zealand dropped 1.6 percent to $3.415 and Comvita fell 1.3 percent to $8.19.

Outside the benchmark index, Hellaby Holdings gained 0.3 percent to $3.51 and ASX-listed Bapcor gained 0.7 percent to A$5.92. Auto-parts company Bapcor is creeping closer to control of Hellaby with an unfriendly offer in the market at $3.60 per share and has built a 47.5 percent stake according to its latest disclosure this morning.

"You'd have to think they're pretty likely to get to 50 percent, at which point they could waive the condition and effectively get control," Goodson said. "At a quiet time of year when you wouldn't think there would be many acceptances coming in, they're making a little bit of progress."

(BusinessDesk)

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