NZ stocks: Shares soar on interest rate cut

12.00 pm

WELLINGTON - The New Zealand sharemarket greeted this morning's interest rate cut with open arms, with stocks rising across the board in the first couple of hours of trading.

As was widely anticipated, Reserve Bank Governor Don Brash cut the Official Cash Rate (OCR) by half a percentage point in the bank's quarterly review of monetary conditions.

The cash rate drops from 5.25 per cent to 4.75 per cent.

That saw the benchmark NZSE-40 index rise 9.59 points, or 0.48 per cent, to 2019.59 by just after 11am, on turnover worth a healthy $58.6 million.

"It was a very good market again this morning -- hot as," Forsyth Barr Frater Williams equities dealer Alan Wills said.

"Brash has come out and lowered interest rates, predictably, by half a percentage point."

Also buoying the market this morning was a successful listing of Fisher & Paykel's healthcare division on the Nasdaq overnight.

"The ADSs (American Depository Shares) has been very well received in the US so that is flowing through to the local market here," Mr Wills said.

The ADSs opened in the US at $US21.55 ($51.59) and reached a high of $US24.88 -- a gain of 38 per cent on their $US18 issue price.

Converting the ADSs -- each of which holds four base shares -- into ordinary shares, meant F&P Healthcare ended US trading around $NZ13.61.

On the local market, the healthcare division was trading up 50c at $14.50 by mid morning, while the company's kitchen and laundry appliance business was up 61c at $9.61 on its first day of trading as a standalone business. The stock traded at $13.50 on its last day as a combined unit on Friday.

The two divisions came second and third on the NZSE-40's turnover table, behind market leader Telecom, with healthcare shares worth $10 million and appliance shares worth $7 million, changing hands.

Fletcher Building was up a cent at $2.73 after chairman Roderick Deane yesterday expressed confidence the company's earnings for the six months to December 31 would be substantially higher than those for the previous corresponding period.

"Low interest rates are very good for Fletcher Building," Mr Wills said.

Telecom slipped 6c to $4.81 by mid morning, losing its early grip on yesterday's 29c gain to fresh two-month highs. The telco yesterday reported a flat but solid first quarter net profit of $151 million.

"It is holding the gains from yesterday so that is impressive," Mr Wills said.

"Basically, they had quite a good quarter. What we are saying is the next quarter is going to be a bit flat -- it is going to be hard yards from here -- but intrinsically, the business is worth more than where it is trading at the moment."

Other stocks to gain ground included Carter Holt Harvey, up 6c at 154, DB Group, up 15c at 585, Sky City, up 9c at 1239, Sky TV, up a cent at 375, the Warehouse, up 7c at 665 and Restaurant Brands, up 5c at 190.

Utilities investor, Infratil, was up 3c at 169 after yesterday lifting its interim profit by 72 per cent and signalling an intent to widen its investment strategy to technology unrelated to infrastructure.

The company made a $17.47 million profit for the six months to September 30, compared with $10.12 million for the same period last year, which was boosted by a $17.8 million gain from the sale of investments.

Northland Port Corp was up 5c at 215 as it continues its run of bullish port company results. The company said yesterday it more than doubled its interim profit in the six months to September 30 on record cargo volumes.

In all, rises outnumbered falls by 52 to 16 among the 111 stocks traded.

Bucking the trend, Contact was down a cent at 408, as were Mainfreight at 137 and Tranz Rail at 445.

In the US overnight, stocks were sharply higher, as Wall Street bulls were encouraged by military gains in the US-led campaign in Afghanistan.

The Dow Jones industrial average jumped 195.58 points, or 2.06 per cent, to end at 9,750.95, according to the latest data, while the Nasdaq composite climbed 51.96 points, or 2.82 per cent, to 1,892.09. The Standard & Poor's 500 index rose 20.76 points, or 1.86 per cent, to 1,139.09.

The Nasdaq and S&P 500 posted their highest closes since late August, and the highest finish for the Dow since September 6.

- NZPA