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NZX 50 rises to 3-week high; banks gain

MARKET CLOSE: NZX 50 rises to 3-week high; banks gain

Feb. 3 – New Zealand shares rose, pushing the NZX 50 Index to the highest in about three weeks, amid perceptions the downturn is already reflected in prices and as Australian banks rallied.

The NZX 50 rose 8.79, or 0.3%, to 2780.29 as at the 5 p.m. close of trading in Wellington. Within the index, 24 stocks rose, 13 fell and 13 were unchanged. Turnover was NZ$77.5 million.

Westpac Banking Corp. rose 6% to NZ$20.79, leading the index higher after Commonwealth Bank of Australia said first-half profit beat analysts’ estimates by 20%, stoking optimism the region’s lenders are weathering the global financial market turmoil. Profit fell 16% to A$2 billion in the six months ended Dec. 31, CBA said yesterday. Australia & New Zealand Banking Group’s stock rose 4.5% to NZ$17.35.

Also helping sentiment today, the Reserve Bank of Australia cut its benchmark interest rate by 100 basis points to 3.25% while the federal government announced a A$42 billion fiscal stimulus package, helping underpin growth in New Zealand’s biggest export market.

“At the margin it is all positive” for New Zealand stocks, said Paul Robertshawe, who manages NZ$250 million at Tower Asset Management in Wellington.

Tower’s stock holdings have been “heavily defensive” but “we’re getting a lot closer to the point where we want to change that and buy cyclicals,” Robertshawe said. “That’s our next move.”

Homeware and sporting goods retailer Briscoe Group gained 5.6% to 75 cents after managing director Rod Duke said second-half profit won’t slump as much as first-half earnings, which tumbled 71%. Fourth-quarter sales slipped 0.9%, and Duke said he was “reasonably satisfied” given the challenging retail sector.

Pumpkin Patch, the children’s clothing chain that counts Australia as its biggest market, jumped 5.7% to 93 cents. Skellerup Holdings climbed 5.8% to 73 cents.

Robertshawe said he expects earnings downgrades during the earnings season that kicks of this month though “the market is pricing in a lot worse than consensus.”

Nuplex Industries dropped 2.6% to NZ$2.60, extending its three-day slide to almost 12%, after the company lowered its profit forecast, stoking speculation it may breach debt covenants. First NZ Capital analyst Jason Familton said the company would have to reduce bank debt to stay within the terms of its loan agreements, according to the National Business Review.

Tower’s Robertshawe said Nuplex has “a number of offsets” including asset sales, deferring capex or suspending dividends. The company “is fairly close to the wind at a time when markets are pretty bleak – it’s another risk factor,” he said.

Retail investors may be lured to fixed-income securities over shares after companies including Tower Ltd., Fonterra Cooperative Group, New Zealand Post and Meridian Energy announced plans to sell notes or bonds.

More than half a billion dollars of such sales have been announced this week as corporates look to tap demand for higher fixed returns in a market where deposit rates are dwindling.

In Australia, the S&P/ASX 200 Index climbed 0.3% to 3508.7. Commonwealth Bank surged 9.8% to A$29.05 after its profit forecast.

Woolworths climbed 1.7% to A%7.61 on the prospects of increased consumer spending from the government’s stimulus package. Building-supplies company Boral Ltd. slipped 0.6% to A$3.13 after Standard & Poor’s lowered its credit rating outlook to ‘negative’ and cut its short-term rating.

In Japan, the Nikkei 225 Index fell 0.6% to 7824.67.


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