NZ shares gain as prospect of rate cut stokes demand for yield stocks

Peter McIntyre

The S&P/NZX 50 index rose 59.79 points, or 0.7 percent, to 9,133.51. Within the index, 27 stocks gained, 14 fell and nine were unchanged. Turnover was $116.9 million.

Stocks across Australia and New Zealand gained as investors increased their bets on both central banks cutting interest rates, boosting the attraction of equities over fixed-income assets such as bonds and term deposits. Reserve Bank of Australia governor Philip Lowe yesterday opened the door to a rate cut in a speech, while weaker than expected jobs data reignited speculation New Zealand's central bank will lean towards a cut. The S&P/ASX 200 index was up 1.3 percent in afternoon trading.

"The share market loves low interest rates - the cost of capital is cheaper and also investors look for stocks when rates are low," said Peter McIntyre, an investment adviser at Craigs Investment Partners.

Utilities companies have been a favourite for investors in the low rate environment of the past decade, offering a relatively secure income stream and low equity risk. Chorus rose 2.3 percent to $5.04 with 847,000 shares changing hands, twice its average volume. Meridian gained 2 percent at $3.65, a record close, on 1.1 million shares.