NZ stocks: Telecom leads big rally

The sharemarket soared to its highest close since September after Fletcher Challenge shareholders voted in favour of breaking up the group and Shell's $4 billion takeover of the Energy division.

The benchmark NZSE-40 index closed up 38 points or 1.88 per cent at 2061.36 - the market's biggest daily points gain since October.

The overall market has gained 186 points, or 10 per cent, since January 1.

Telecom posted the market's biggest gain of the day - up 28c at $5.69, while Fletcher Energy added just 5c to $9.40.

Fletcher Building and Forests, let loose from the shackles of Fletcher Challenge, also gained. The separation frees up the divisions, making it easier for them to attract takeover offers of their own, brokers said. Building closed up 9c at $2.17, while Forests added 1c to 33c.

But opinions were mixed about the merits of the sale.

Cavill White managing director Don Turkington said the news was very good for the New Zealand sharemarket's prospects as it provided certainty.

"A lot of money is going to be released into the kiwi market. It doesn't have to be spent in New Zealand but a lot of it will.

"It's really been a key to unlocking the market," he said.

But ABN Amro equities director Philip Hardie Boys was less convinced.

"We are losing 7 per cent of our market capitalisation and it is not the tonic we need. I think it is disappointing.

"We are losing a big company, a good company and in the short term people have lost sight of that," he said. "It is a small sharemarket as it is, without losing the third biggest company by market capitalisation - it has provided for over 50 per cent of the market turnover in recent months," he said.

At issue is how much of Shell's $4 billion offer will filter into the New Zealand market.

Macquarie Equities managing director Ian Waddell said New Zealand was in a good position to convince international shareholders to leave their money here.

"New Zealand is seen as quite a good, safe haven, and a market that has been pretty undervalued for a year or so. The economic figures coming back are looking pretty strong so there is pretty good interest in our market."

Other stocks to gain on the back of the deal included Contact Energy, up 10c at $2.99, Carter Holt Harvey, up 3c at $1.91, and Fisher & Paykel, rising 10c to $8.75.

Sky City jumped 21c to $9.46. On the downside, Advantage shares continued to slide, down 4c at $1.13.

The New Zealand dollar was looking fairly healthy yesterday and maintained its strength against the slumping Australian dollar, despite ending locally on its lows below 43USc.

Big news across the Tasman, including a 0.25 percentage point rate cut by the Reserve Bank of Australia and disappointing gross domestic product figures, squelched the aussie. The kiwi jumped to 83.50Ac.

- NZPA