NZ shares gain as hunt for yield lifts Air NZ, Genesis

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New Zealand shares rose for a seventh day, following Wall Street higher, as a pickup in risk appetite prompted investors to renew their hunt for stocks offering relatively high dividends. Air New Zealand and Genesis Energy gained.

The S&P/NZX 50 index increased 40.27 points, or 0.5 per cent, to 7422.49. Within the index, 28 stocks gained, 15 fell, and seven were unchanged. Turnover was $134m.

Asian stock markets were largely higher in afternoon trading as Wall Street's Nasdaq Composite Index trades near record levels in an environment where investors have regained their appetite for riskier assets. The Chicago Board Options Exchange Volatility Index (VIX), known as Wall Street's fear gauge fell as low as 9.56, the lowest since early 2007.

"Notwithstanding the fun and games on the Korean peninsula, people are pretty comfortable with where the world's at at the moment," said James Smalley, a director at Hamilton Hindin Greene. "Interest rates might not rise as quickly as expected and people are still looking for a bit of yield."

Air NZ led the benchmark index higher, rising 3.3 per cent to $2.695. The company yesterday said former Prime Minister John Key will join the airline's board from September and the national carrier has fared better than domestic rival Jetstar in recent reputational surveys.

Smalley said while the Key effect may have helped sentiment, the stock has been on the mend after a sharp sell-off earlier this year and offered investors a relatively high dividend yield. The stock was trading at a dividend yield of 17 per cent.

Power companies, which are typically held for their relatively attractive dividends, also gained. Genesis Energy, which yesterday announced the acquisition of Nova Energy's LPG retail business, rose 1.6 per cent to $2.185, Mercury NZ increased 1.9 per cent to $3.23, and Meridian Energy advanced 1.4 per cent to $2.83.

Telecommunications utility Chorus increased 2 per cent to $4.53 on turnover of $19m. Smalley said the network operator has attracted large trading volumes since it was added to the S&P/ASX 200 index in Australia, which means large index-tracking investors will have to own shares in the company.

Port of Tauranga gained 3 per cent to $4.18 The port operator's main rival, Ports of Auckland, yesterday bought out its partner in a nationwide logistics joint venture.

A2 Milk Co posted the biggest fall on the day, down 2 per cent to $3.36. The milk marketing company has been trading near record-highs after upgrading its earnings guidance, and Smalley said the decline was probably investors cashing in some of those recent gains.

Australia & New Zealand Banking Group fell 1.7 per cent to $35.10 after the dual-listed lender posted a 23 per cent gain in first-half earnings as it slashed staff to cut costs in the face of shrinking interest margins. Westpac Banking Corp declined 1.2 per cent to $37.80, while locally owned lender Heartland Bank fell 1.2 per cent to $1.67.

Smalley said the net interest margins are an important indicator for the banks and ANZ's shrinking margins "might be canary in the coal-mine stuff" and weighing on the sector.
Scales Corp fell 0.6 per cent to $3.33 after the horticulture firm declared a final dividend of 10 cents per share, payable in July.

Outside the benchmark index, New Zealand Oil & Gas was unchanged at 63 cents. A substantial shareholder notice showed the Cushing family increased its stake to 7.3 per cent from 6.3 per cent since mid-December ahead of the planned capital return to shareholders.

NZME shares fell 2.2 per cent to 89 cents ahead of tomorrow's Commerce Commission decision on whether the news media group will be allowed to merge with its major domestic rival, Fairfax New Zealand.

Colonial Motor Co was unchanged at $7 after figures showed new vehicle sales continued to reach new records in April.