Price said there had been limited direction from overseas markets overnight, and trade at the end of school holidays was typically light.
Markets are preparing for next Wednesday’s Official Cash Rate (OCR) review from the Reserve Bank and have fully priced in a 25 basis point fall to 2.75%, with an outside chance of a 50 basis point cut.
“One thing you have got to remember is that when the Reserve Bank did the forecasting, they had forecast a second quarter contraction in GDP of 0.3% and it came in at 0.9%, so they have been a bit behind the curve,” Price said.
Forsyth Barr expects the OCR to be down by 75 basis points by the year’s end, and Price said expectations of lower rates were driving rate-sensitive stocks higher.
“Property has continued to be the shining light,” Price said.
“They had a really strong month last month, and you’re still looking at pretty attractive yields for a number of them.
“They’ve been sort of a bit unloved of late, but they have come in for quite a bit of attention.
“What we have seen over the last few months is a lot of the stocks go from being quite big discounts to some of them now just going at slight premiums.”
Price expected the property stocks to show dividend growth because their financing costs should fall as a result of swap rates having fallen sharply.
Kiwi Property firmed 2c or 1.9% to $1.08 while the S&P/NZX All Real Estate Index firmed 20.4 points or 1.11% to end at 1861.77.
SkyCity Entertainment Group, which had been languishing after a poorly supported capital raise, firmed 4.5 to 71.5c.
On the downside, a2 Milk dropped 35c or 3.37% to $10.05 and Auckland International Airport fell 9c (1.1%) to $7.91.
Price said both Auckland Airport and a2 Milk were strong going into the end of last month, but were now retracing from “overbought” positions.
The Warehouse ended 1c down at 79c after this week reporting a disappointing annual result.
The broadly break-even outcome was largely as expected but was still a let-down in light of The Warehouse’s $3.1 billion of reported sales and almost $1b of gross profit.
“We take some comfort in management’s focus on returning to profitability through gross margin recovery and right-sizing of its head office costs,” Forsyth Barr said in a report.
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.
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