MARKET CLOSE: NZ stocks rise on Fed rate cut

Dec. 17 – New Zealand stocks were mixed, with about the same number of stocks rising and falling, after the U.S. Federal Reserve cut its target rate to as low as zero and investors said there’s still scope for more shocks in financial markets.

The NZX 50 Index edged up 0.846, or 0.03%, to 2695.93. Within the index, 18 stocks fell, 21 rose and 11 were unchanged or untraded. Telstra Corp., Australia’s biggest phone company, gained 5.5% to NZ$5.54, reviving from its 11% slump yesterday when its network bid was rejected.

NZ Farming Systems Uruguay dropped 3.9% to 75 cents after PGG Wrightson said it would write down the value of its 11% stake in the South American dairy farm developer. Wrightson’s own shares fell 4.4% to NZ$1.53 after the nation’s biggest rural services company cut its full-year profit forecast because of losses at its real estate operation.

Shares across Asia rose today after the Fed cut interest rates to a record low and said it will use whatever means are necessary to revive economic growth. In Sydney, the S&P/ASX 200 Index gained 0.4% to 3570.6. Centro Property Group soared 43% after it banks agreed to accept shares and convertible bonds in exchange for debt, allowing shopping mall owner to avoid liquidation. Japan’s Nikkei 225 Index rose 0.5% to 8612.52 in mid-afternoon trading.

The Fed rate cut “is another important step in the process of trying to improve financial markets,” said Angus Gluskie, who manages A$400 million at White Funds Management in Sydney. “Equities are offering reasonably high yields but people don’t want to put their capital at risk.”

Steel & Tube Holdings, which supplies steel building products such as reinforcing rods, rose 6.4% to NZ$3. Fletcher Building, which owns the U.S.-based Formica laminated board business, gained 2.4% to NZ$6.07.

ANZ Banking Group fell 8% to NZ$16.08 and Westpac Banking Corp. dropped 2.8% to NZ$19.25, tracking their Australian shares lower after Commonwealth Bank of Australia was forced to lower the price and scope for its share sale because of bigger than expected bad debts.

New Zealand Oil & Gas fell 0.8% to NZ$1.32 after announcing it had acquired 5.77% of Pan Pacific Petroleum, increasing its exposure to the Tui oil field.

The gain in local stocks follows a rally on Wall Street post the Fed’s statement, sending the Standard & Poor’s 500 Index up 5% and the Dow Jones Industrial Average up 4.2%. Tech stocks also jumped, with the Nasdaq Composite gaining 5.4%. New Zealand’s benchmark index has fallen 34% this year.

“The reaction has been a positive for equity markets - I think it will help, but it's no cure-all, there's no quick fix,” said Cameron Bagrie, chief economist at ANZ National Bank.

“Don't get caught in the hype – policy makers are pulling out all the stops to attach the bungy cord,” he said. “We're facing challenging times.”

Tourism Holdings fell 1.6% to 62 cents after saying it has a conditional agreement to sell its 49% shareholdings in InterCity Holdings Limited for NZ$9.5 million to its joint venture partners. The company said it will book a loss on the sale of NZ$3.7 million on the sale.

The government is scheduled tomorrow to release its budget update, which is expected to show a deteriorating position in the wake of a local recession and ongoing worldwide slump.

Bagrie predicts the central bank will cut the official cash rate to below 4% next year from 5% currently.

“We're in a tough economic climate and there will be pressure through 2009,” he said.

(Businesswire)

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