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NZ stocks drop but Fonterra bucks trend

NZ NewswireNZ Newswire 2/08/2016 Sophie Boot

New Zealand shares fell, led lower by Kathmandu Holdings and Fisher & Paykel Healthcare, while Fonterra Shareholders Fund continued Monday's gains.

The S&P/NZX50 Index dropped 27.44 points, or 0.4 per cent, to 7,329.19. Within the index, 24 stocks rose, 21 fell and six were unchanged. Turnover was $155.6 million.

The Reserve Bank of Australia cut its cash rate to 1.5 per cent, a fall of 25 basis points. Speaking ahead of the announcement at 4:30, Peter McIntyre, investment adviser at Craigs Investment Partners, said the market was expecting a rate cut. New Zealand's Reserve Bank will make its next interest rate announcement on Aug. 11.

"It really puts the pressure on the Reserve Bank of New Zealand to cut again, and I think you'll see a firmer tone across New Zealand stocks as the expectation builds for that interest rate cut in August to eventuate - it's just going to drive our market higher because the market likes low-interest rates," McIntyre said.

Kathmandu Holdings was the worst performer on the index, down 1.7 per cent to $1.77.

Fisher & Paykel Healthcare fell 1.4 per cent to $10.46. The company gets more than 50 per cent of its sales in US dollars, and the shares have been impacted by the strength of the New Zealand dollar, McIntyre said.

Dual-listed banks fell, with ANZ down 1.3 per cent to $26.90 while Westpac dropped 0.7 per cent to $32.52.

McIntyre said the banks may need to raise capital in the future to stay in line with capital requirements which have been increasing in Australia.

Fonterra Shareholders Fund gained 2.3 per cent to $5.92 after it kept its forecast farmgate milk price unchanged at $4.25 per kilogram of milk solids and said it expects earnings per share of 50c to 60c for the year ending July 2017. The forecast milk price for 2016/17 means the total payout available to farmers will be $4.75 to $4.85, still below the break-even for many farmers. Industry body DairyNZ estimated the average farmers breakeven price for this season would be $5.05/kgMS.

Air New Zealand was the biggest gainer, up 3.1 per cent to $2.33, a three-month high.

Tegel Group Holdings advanced 2.4 per cent to $1.68 and New Zealand Refining Co rose 2.4 per cent to $2.58.

Outside the main index, PGG Wrightson gained 10.6 per cent to 52 cents and Plexure Group was unchanged at 30 cents.

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