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MARKET CLOSE: NZX 50 rises to record led by Genesis on yield hunt

06 Mar 2015

New Zealand shares rose led by Genesis Energy and paced by Spark New Zealand, as the international hunt for income paying investment returned. Warehouse Group fell after it cut its forecast for the annual dividend.

The NZX 50 Index rose 46.293 points, or 0.8 percent, to a fresh record of 5903.065. Within the index, 30 stocks rose, 10 fell and 10 were unchanged. Turnover was $156 million.

The relatively high dividend yield of the local bourse has lured investors, in a globally low interest rate environment. Utilities, property investors and telecommunication companies rose. Genesis advanced 2.4 percent to $2.335. Spark, formerly Telecom Corp, gained 1.5 percent to $3.30. Contact Energy gained 1.2 percent to $6.13. Precinct Properties New Zealand increased 0.8 percent to $1.205.

"There is a huge yield trade globally," said Matthew Goodson, managing director at Salt Funds Management. "The main impetus for the yield trade really has been the collapse in bond yields, globally."

Warehouse was the worst performer on the benchmark index today falling 4.1 percent to $2.79. New Zealand's largest listed retailer lowered its forecasts for annual profit and dividends, while posting a 19 percent drop in adjusted first-half profit to $37.2 million, as its Red Sheds and Noel Leeming units missed expectations. The retailer had promised to keep its annual dividend payment at a minimum of 19 cents per share as it transitioned to a lower payout rate over two years, but today abandoned that policy, forecasting a 16cps full-year dividend.

"The dividend was cut, and certainly when they raised equity last year a wee bit was made of the dividend they might be able to pay," Goodson said. "It certainly gives a view of the board of Warehouse as to their earnings outlook and the strength of their balance sheet."

Meridian Energy rose 2.2 percent to $2.07, rebounding from yesterday's 4.9 percent drop after an international index unexpectedly excluded the partially-privatised energy generator from among its members, Goodson said. Fund managers who follow the index must hold stocks that are included in it, and some try to buy ahead of the announcement.

"The market has been expecting them to enter the FTSE index, which is an index a number of global funds track closely," Goodson said. "Yesterday it was announced MightyRiver was going into the index, but that Meridian isn't entering that index yet. What you see happen is a lot of hedge funds, broking desks etcetera try to frontline these index changes."

Conversely, MightyRiverPower rose 0.3 percent to $3.44, extending yesterday's gains after being included in the international index.

Air New Zealand rose 0.2 percent to $2.955. The national carrier will scrap its pre-selected travel insurance option after receiving a formal warning from the Commerce Commission, which is cracking down on businesses misleading consumers with 'opt out' additional products.

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