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MARKET CLOSE: NZ shares rise, paced by Summerset; Spark, Fonterra decline

08 Apr 15

New Zealand shares rose, paced by Summerset Group Holdings and Ryman Healthcare as investors bought into retirement village operators. Fonterra Shareholders Fund dropped to a record low, as investors mulled the outlook for the dairy sector.

The NZX 50 Index rose 4.279 points, or 0.1 percent, to 5859.715. Within the index, 24 stocks rose, 11 fell and 15 were unchanged. Turnover was $108 million.

Summerset advanced 0.9 percent to $3.45. Yesterday the retirement village operator said first-quarter sales of occupational rights rose 36 percent from a year earlier to 125, the highest for any first quarter. Rival operator Ryman gained 0.9 percent to $8.22. Metlifecare climbed 0.4 percent to $4.87, while hospital investor Vital Healthcare Trust advanced 1.2 percent to $1.71. Retirement villages and healthcare providers are benefiting from an increase in average life spans, which is stoking demand from the elderly, with the number of New Zealanders aged over 65 forecast to increase by 20,000 annually.

News flow from the retirement village operators had been positive "reminding people of the longer-term position of retirement and aged care," Shane Solly, director at Harbour Asset Management said.

Units of the Fonterra fund, which are entitled to the dividends from the ordinary shares of Fonterra Cooperative Group, declined 2 percent to its lowest close of $5.43, well below its 2012 offer price of $5.50. Last month, the dairy company posted a 16 percent drop in first-half profit to $183 million in the six months to Jan. 31, which it said reflected tough conditions in dairy while also trimming its guidance for dividends to a range of 20 cents to 30 cents, from a previous 25 cents to 35 cents.

"It's still a bit of a backwash from the result release last month," Solly said. "You've got an industry that's gone through a heck of a lot of growth and as all industries that are growing rapidly, it's going through a bit of a test at the moment, particularly globally with what's happening with supply."

The benchmark index has gained some 5.2 percent since the start of the year, pushed higher by investors demand for income paying stocks in a globally low interest rate environment. Regular dividend paying stocks fell as investors looked to secure gains. Spark, formerly Telecom Corp which advanced to record highs earlier in the year, was the worst performer on the benchmark index dropping 2.8 percent to $2.98. Meridian Energy, the energy generator and retailer, declined 1.8 percent to $1.905. Contact Energy slipped 1.7 percent to $5.97.

"Spark, Contact Energy, Meridian are weaker on the day and they're all high yielding stocks held by some of the global investors on the hunt for yield," Solly said. "There's certainly a bit of an unwind and they have been very well supported by investors seeking yield."

Diligent Board Member Services fell 0.2 percent to $5.59. Mark Weldon, former NZX chief executive, has resigned as a director of Diligent, effective tomorrow, leaving the governance software developer temporarily in breach of NZX listing rules as it looks for his replacement.

Tomorrow will mark the year's first NZX float, with Fliway Group debuting on the bourse as the transport and logistics company completes its $34 million initial public offer.

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