NZ stocks inch higher ahead of earnings season

Kiwi Property chief executive Clive Mackenzie. Photo / File

New Zealand shares inched higher but trading was mixed as investors prepare for the local earnings season and hope for progress on the on-going trade dispute between China and the US.

The S&P/NZX 50 index rose 1.64 points, or 0.02 per cent, to 9110.55. Within the index, 29 stocks rose, six were unchanged and 15 fell. Turnover was $120.8 million.

US markets finished slightly higher, aided by good results from semiconductor makers and airlines. But Commerce Secretary Wilbur Ross downplayed the prospect of quick progress in US-China trade talks next week saying the parties were "miles and miles" from a resolution, although a lot of preparatory work had been done.

The S&P500 index rose 0.1 per cent and the Nasdaq was 0.7 per cent higher. In Australia, the S&P/ASX 200 was up 0.8 per cent, and in Japan the TOPIX was 1 per cent higher.

Greg Smith, head of research at Fat Prophets, said the local market has started the year well. While the outlook remains mixed, given the on-going US-China trade issue and the partial government shutdown in the US, investors have nevertheless been adding a mix of both defensive stocks – like power companies – and some growth stocks, such as Pushpay Holdings, to their portfolios.

Earnings out of the US so far have generally been good and that is adding to suspicions October's sell-off was over-done, he said.

"What we are seeing both domestically and overseas is that things possibly aren't as bad as has been priced-in," he said. "The bar has been set quite low."

Spark New Zealand was again among the heaviest traded stocks. It was down 0.2 per cent at $4.12, with almost 7.9 million shares traded.

Other stocks to beat the one million turnover mark included Paysauce, with 2.6 million shares traded, NZ Property Fund, Chorus, Pushpay and Z Energy.

Smith said 2019 will be a big year for Spark's move into sport content and streaming, and the trend of greater convergence across telecommunication and media will continue.

"Spark has been at the forefront of that and they'll be looking to disrupt Sky TV further," he said.

Sky Network TV, which is introducing hybrid internet-based services to complement its satellite TV business, rose1.1 per cent to $1.91.

Chorus rose 0.4 per cent to $4.845. Pushpay rose 1.7 per cent to $3.69 and Z Energy rose 0.2 per cent to $6.09.

AMP fell 6.4 per cent to $2.48 after warning investors profit for 2018 may fall to A$30m ($31.4m), from A$848m in 2017, due to losses at the businesses it is selling to Resolution Life and extra capital it is having to carry against those assets until the transaction is completed.

Smith says AMP and the Australian banks generally are going to face tighter regulation and higher costs from that country's royal commission into banking conduct headed by Kenneth Hayne. It is due to issue its final report next month.

Smith said a lot of "Hayne pain" has already been priced into the sector. But he said the housing markets of both countries are well past their peak and in New Zealand the banks will also face the challenge of holding more capital to meet the Reserve Bank's proposed new requirements.

"Stopping the wheels of credit spinning" doesn't seem that smart, given where in the cycle the economy is at the moment, he said.

Oceania Healthcare fell 2.8 per cent to $1.06. Aged care operating earnings for the half-year through November fell 14 per cent from a year earlier due to higher wage costs. Company-wide underlying operating earnings were up 7.5 per cent.

Smith said the retirement sector will have to work a bit harder, given they are unlikely to enjoy any further "tailwinds" from the rising property market they have enjoyed for several years. Investors will focus more on underlying earnings.

Ryman Healthcare fell 1 per cent to $11 and Summerset Group was unchanged at $6.44. Kiwi Property rose 1.5 per cent to $1.40 and Precinct Properties rose 0.3 per cent to $1.485.

Among smaller cap companies, PaySauce was unchanged at 1.8 cents having risen 29 per cent yesterday. On Wednesday the company said its recurring revenue in the December quarter more than doubled from the same quarter of 2017. PaySauce listed on NZX on December 21 via a backdoor listing through the shell of Energy Mad.

IkeGPS ended down 6.2 per cent at 61 cents. The utilities measurement specialist has fallen almost 18 per cent after yesterday saying it may not break-even at the operating level in the March quarter due to a delay closing a large contract for its Ike Analyze service.