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NZ dollar gains on National Party election win

The New Zealand dollar gained after the incumbent National Party won a convincing election victory on the weekend, instilling confidence in the administration’s ability to continue pursuing its policy programme.

The kiwi rose to 81.53 US cents at 5pm in Wellington from 81.49 cents at 8am, and was up from 81.24 cents on Friday in New York. The trade-weighted index advanced to 78.78 from 78.53 last week

The local currency got a boost from the Saturday general election, which delivered the ruling National Party a bare majority, with 61 seats of the 121-seat Parliament. If that holds after special votes are counted, Prime Minister John Key is still likely to support agreements with the Maori, United Future and Act parties, taking the government’s total to 65 seats. Any further gains in the kiwi may be muted ahead of Fonterra Cooperative Group’s annual result on Wednesday, which may see the dairy exporter update its forecast milk payout to farmers and will confirm final payouts for the 2013/14 season.

“If they (Fonterra) comment on the forecast right now, you’d be betting they would be dropping it,” said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. The local currency may trade between 80.80 US cents and 81.80 cents. ”It’s hard to see it breaking out of that,” he said.

A BusinessDesk survey of 10 currency traders and strategists predicts the kiwi will probably trade between 80.50 US cents and 82.50 cents this week. Three pick the local currency to decline, four expect a gain and three say it will probably remain relatively unchanged.

New Zealand consumer confidence fell in the third quarter this year, according to a Westpac McDermott Miller survey. The series extended a decline from a nine-year high in March as rising interest rates and a slower pace of economic growth weigh on households, though optimists remain dominant and the index remains at historically high levels.

The local currency gained to 88.71 yen from 88.56 yen last week, and increased to 91.24 Australian cents from 90.96 cents. It edged up to 63.41 euro cents from 63.32 cents, and was almost unchanged at 49.86 British pence from 49.87 pence.

NZ consumer confidence falls in third quarter as rising rates dim outlook

New Zealand consumer confidence fell in the third quarter amid signs rising interest rates and a slower pace of economic growth are dimming the outlook and kiwis’ spending plans.

The Westpac McDermott Miller Consumer Confidence Index fell to 116.7 in the September quarter, from 121.2 three months earlier and from a nine-year high of 121.7 in the March survey. A reading above 100 indicates more optimists than pessimists.

The Reserve Bank has signalled a pause in its tightening cycle after lifting the official cash rate to 3.5 percent, but economists see further hikes to the OCR from early 2015, driving up borrowing costs. That may be reflected in consumers’ attitudes toward their current and future finances and appetite to buy a major household item, which all weakened.

“Consumer sentiment shifted down a gear in the September quarter, on the back of less exuberant economic news, rising interest rates and, possibly, a bout of uncertainty ahead of the election,” said Westpac chief economist Dominick Stephens. The drop in those deeming it a good time to buy a household item “may be an early sign of consumers becoming a touch more cautious with their spending.”

The present conditions index fell to 113 from 116.8 three months earlier and the expected conditions index fell to 119.3 from 124.1. Consumers’ attitude to their current financial situation weakened to -0.1 from 2.1 and for their expected financial situation, slipped to 10.2 from 11.5.

Those deeming it a good time to buy fell to 26.1 from 31.5. The one-year economic outlook tumbled to 18.3 from 30.8, while the five-year outlook recorded a more modest decline, to 29.3 from 30.1.

Pumpkin Patch overhauls board, chair Freeman retires

Pumpkin Patch has continued to refresh its board, with chair Jane Freeman the latest to announce her departure, as the childrenswear chain tries to revive falling sales in a changing retail environment.

Peter Schuyt, who has been an independent non-executive director since 2012, will take over from Freeman at the start of next month, while former Warehouse Group executive Luke Bunt will join the Pumpkin Patch board from Oct. 1, the Auckland-based company said in a statement.

Schuyt is also a director at Tatua Co-operative Diary Company, Port Nelson, Foodstuffs North Island and Landcare Research New Zealand, while Bunt was formerly chief financial officer at Warehouse, currently chairs Flooring Xtra Co-operative and also sits on the boards of Comvita, Profile Foods, Smith’s City Group and Super Liquor Holdings

The changes are the latest in a series of board and senior executive reshuffles as the company looks to revive its performance with new blood in the boardroom. Founder Sally Synnott retired from the retailer’s board in July to be replaced by Griffin’s Foods executive Josette Prince.

“Over the past year we’ve embarked on an important change and review process,” Freeman said. “With the initial stage now complete, I feel that I can step aside confidently with the business positioned for the future.”

Freeman joined the Pumpkin Patch board in 2004, before taking the chair in 2010. She is currently a director of Foodstuffs North Island, ASB Bank, Kiwi Income Property and winemaker Delegats Group.

In March Pumpkin Patch announced a strategic review including a close look at its IT infrastructure, in a bid to make its distribution and supply chain management more efficient, and the size of its store footprint in a store-by-store review.

In May, the company cut its guidance for after-tax earnings before reorganisation costs to a range of $1 million and $3 million for the year ending July 31, having earlier said earnings would be little changed from last year’s $8.5 million. The company is due to report earnings on Friday.

The children’s clothing retailer exited the NZX 50 Index last year and has since been followed by fellow retailers Hallenstein Glasson, the local clothing chain, and Brisbane-based jeweller Michael Hill International this year. Retailers, especially those in the rag trade, are under increased pressure to keep prices cheap as shoppers are lured by bargains from international online retailers.

Shares of Pumpkin Patch last traded at 41 cents, and have declined 54 percent this year.

George Kerr to dilute stake in Pyne Gould share issue

Pyne Gould Corp’s managing director George Kerr will dilute his stake in the financial services firm if it goes ahead with a planned share issue, which will increase its stake in Equity Partners Infrastructure Co No 1, the so-called EPIC fund, which holds a minority stake in a UK motorway operator, Moto.

The Guernsey-based firm wants to lift its stake in the EPIC,  fund to 49 percent from 27 percent now, and plans to pay EPIC shareholders with Pyne Gould shares, it said in a statement. Pyne Gould may issue up to 41.6 million shares, representing 20 percent of the current shares on issue, to EPIC shareholders, though hasn’t settled on a price yet.

The EPIC acquisition would dilute the Kerr-controlled Australasian Equity Partners Fund No 1 LP (AEP) of Pyne Gould to as little as 67 percent, from its existing 80 percent stake. AEP, which counts Californian hedge fund Baker Street Capital as a minority partner, took control of Pyne Gould in 2012, paying 37 cents a share.

This week, Pyne Gould said it wants to oust two of EPIC’s directors and install its own in a bid to cut administration costs, reduce debt and lift shareholder value. Pyne Gould said it was concerned about EPIC’s $10 million loan for three years of working capital, given the company’s size and its structure as a holding company with one investment.

Pyne Gould and Kerr have been closely linked with the EPIC fund over the years, terminating its management contract in 2012 with an $8.9 million payment after it was advised Kerr’s takeover would trigger pre-emptive rights in the shareholders’ agreement for its 17.5 percent stake in UK motorway service operator, Moto.

The firm also updated its plans to list in London, which it expects in the first year of 2015, and intends to prepare its accounts in British pounds.

Pyne Gould also outlined potential dividend policy, which it sees as being 50 percent of consolidated sustainable net profit. It doesn’t expect to include profit from firms where it owns less than 100 percent.

Three years ago, Kerr said the firm was no longer a high-dividend stock and needed owners with a long-term view and the ability to inject more capital in his pitch to take over the company after its exit from Marac Finance. At the time, Kerr said “PGC is now a company more likely to re-invest its earnings in its assets with a patient seven years and beyond investment horizon.”

Last year, chairman Bryan Mogridge told shareholders the company is seeking to deliver compound growth north of 15 percent over the medium to long term, meaning it will deliver “lumpy results” and has a policy of not providing market guidance.

The company’s shares fell 2.2 percent to 44 cents today, and have shed 6.3 percent this year.

MARKET CLOSE: NZ shares follow Wall Street higher, Kathmandu, Fletcher gain

New Zealand shares rose in a global rally as Wall Street climbed to records overnight, while a falling New Zealand dollar further supported local stocks. Kathmandu Holdings rose, paced by Fletcher Building and A2 Milk Co.

The NZX 50 Index gained 27.163 points, or 0.5 percent, to 5181.345. Within the index, 32 stock rose, nine fell and nine were unchanged. Turnover was $153 million.

Overnight, Wall Street rose to a record, as investors were bouyed by the prospect of the US Federal Reserve policy makers keeping interest rates near zero for a “considerable time”. Higher US interest rates would encourage some investors to repatriate funds back to the world’s biggest economy which have been sitting in yield-bearing assets around the world. Asia followed suit with Japan’s Nikkei 225 Index climbing 1.7 percent in afternoon trading, Australia’s S&P/ASX 200 Index advancing 0.3 percent and Hong Kong’s Hang Seng Index increasing 0.3 percent.

Pushing up local stocks was the continuing decline of the kiwi dollar. The trade-weighted index, which is a measure of the value of the kiwi dollar against a basket of major trading partners’ currencies, has fallen some 4.6 percent from its June high, which adds support to export businesses and makes New Zealand stocks look relatively cheap.

Kathmandu, the outdoor goods company which gets two-thirds of its revenue from Australia, led the benchmark index higher up 4.8 percent to $3.09. A2, the milk marketer which gets the majority of its earnings across the Tasman, climbed 1.7 percent to 60 cents. Fletcher Building, the construction and building supplies company with international operations, advanced 0.5 percent to $8.82. Fisher & Paykel Healthcare Corp, which exports more than 90 percent of its breathing apparatus products, rose 0.4 percent to $5.04.

“Some positive leads from offshore, with the US market hitting an all time high, is always going to drive positive sentiment elsewhere,” said Mark Lister, head of private wealth research at Craigs Investment Partners. ”The kiwi dollar remains subdued, now off some 7 or 8 percent over the last couple months against the US dollar and that’s supportive for the export sector and positive for sentiment as well.”

Xero, the cloud-based accounting software company, advanced 0.9 percent to $21.40. Spark New Zealand, formerly Telecom Corp, rose 1 percent to $3.00.

New Zealand will vote in its general election tomorrow. Energy companies are prone to being sold amid political uncertainty, as a change of government would mean greater regulation for the sector.

Meridian Energy advanced 2.5 percent to a record $1.45. MightyRiverPower rose 0.4 percent to $2.41. Vector, the Auckland lines company, climbed 3.1 percent to $2.64. TrustPower increased 1.3 percent to $7.19. Genesis Energy was up 0.8 percent to $1.92.

“You would have thought with an election tomorrow there would be more caution across the market,” Lister said. “The market seems reasonably relaxed about the election, and you’d almost say the market is of the view that we’ll have the same government on Monday as we have today.”

Pacific Edge declined 1.1 percent to 91 cents. The non-invasive bladder cancer test maker has appointed former McKinsey & Co consultant Charles Sitch to its board and hopes his contribution will speed up the global commercialisation of its Cxbladder device.

Chorus, the telecommunications network operator, rose 1.7 percent to $1.75. The company charged with building New Zealand ultrafast broadband network is in dispute with the Commerce Commission over the proposed cuts to the network operator’s regulated prices, and is pitching new Boost services outside the terms of regulation. Chorus today hit back at claims its proposed Boost variant services would breach the terms of its regulation, saying the Commerce Commission’s legal advice is at odds with the law, and needs to be seen in the wider context of the changing market.

Goodman Property Trust, which is selling assets to fund development, rose 0.9 percent to $1.07 after the Auckland-based property investor said it will spend $33.4 million on four developments and has sold the Carter Holt Harvey Packaging Facility in Christchurch for $16.37 million to an undisclosed buyer.

Christchurch City Holdings, the city council’s investment and infrastructure unit, has declared its takeover of Lyttelton Port Co unconditional, gaining 97 percent of shares after offering $3.95 a share, and a 20 cents per share special dividend for a total of $4.15 to mop up the remaining stock after entering into a lock-up agreement with Port Otago. Lyttelton Port shares last traded at $3.90.

NZ dollar little changed on the week after Fed sparks big moves

The New Zealand dollar is heading for a 0.2 percent weekly decline against the greenback, after the prospect for higher US interest rates pushed the local currency to a seven-month low.

The local currency traded at 81.37 US cents at 5pm in Wellington from 81.51 cents on Friday in New York last week. It traded at 81.43 cents at 8am, up from 81.06 cents yesterday. The trade-weighted index advanced to 78.46 from 78.28 yesterday, largely unchanged from 78.53 at last week’s close.

A BusinessDesk survey of 11 currency traders and strategists on Monday predicted the kiwi would trade between 79.60 US cents and 83.40 cents this week. Six picked the local currency to decline, three said it would remain relatively unchanged and two expected a gain.

The kiwi fell as low as 80.73 cents on Thursday after the Federal Open Market Committee raised its estimate for the key interest rate in 2015, while Federal Reserve chair Janet Yellen reiterated that rates will remain low for a “considerable time.” The prospect of a shift away from the Fed’s zero-interest rate policy stoked demand for the greenback, which has seen it surge against the yen.

“The kiwi made an attempt at a bounce and got above 82 US cents, then the FOMC came out and slammed it back down,” said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. “The trend in the US dollar is still intact.”

Local figures today showed New Zealand’s economy is still relatively strong, with annual net migration at a record in the year ended Aug. 31, and a private consumer confidence survey showing household sentiment climbed from a 10-month low this month. Government figures yesterday showed New Zealand’s economy grew 0.7 percent in the June quarter, for annual expansion of 3.5 percent.

Tomorrow’s general election holds potential uncertainty for markets if there isn’t a clear outcome, and it takes awhile for a government to be cobbled together, ANZ’s Tuck said.

The local currency is heading for a 1.4 percent weekly decline against the pound after Britain’s currency rallied on early polls showing Scotland has rejected a binding referendum to leave the United Kingdom. The kiwi traded at 49.38 British pence at 5pm in Wellington from 50.10 pence on Friday in New York last week. It traded at 49.84 pence yesterday.

The local currency rose to 88.79 yen from 88.13 yen yesterday, and advanced to 90.77 Australian cents from 90.46 cents. It was little changed at 62.98 euro cents from 63.02 cents.

Queenstown Airport has busiest ever winter, heading for record 2014

Queenstown Airport Corp, the nation’s fourth busiest airport, handled a record number of passengers this winter as it benefited from increased flights and capacity, prompting it to install a $450,000 ’pop-up’ tent structure for international passengers as it finalises plans for expanding its terminal.

Trans-Tasman flights were 25 percent ahead of last winter, with the airport hitting a record 20 international flights on several days during peak times in July and August . Passenger numbers rose 7.9 percent to 354,392 in the three months through August, compared with the same period a year earlier, according to the company’s monthly passenger data.

Queenstown Airport, the gateway to New Zealand’s Southern Lakes region, is heading for record passenger numbers in calendar 2014, surpassing 2013 which was itself the busiest on record. The airport is handling more passengers as it benefits from airlines such as Air New Zealand, Qantas Airways and its subsidiary, Jetstar, and Virgin Australia adding more flights and larger planes from Australia. The region is luring more visitors thanks to its snowfields and other outdoor adventure activities as well as key events such as the annual Winter Festival, the New Zealand Golf Open and the upcoming inaugural Queenstown International Marathon.

“Passenger-wise it’s very busy,” said chief executive Scott Paterson. “We were very busy, a very hectic little international airport during winter.”

The passenger throughput was even more extraordinary given the airport has a daylight curfew which prohibits flights beyond about 5:30pm in winter, he said.

The latest data shows Queenstown passenger numbers in the year through August are tracking 5 percent ahead of the year earlier period, led by a 30 percent gain in international passenger volumes.

“The outlook remains strong,” Paterson said. “We need a bigger permanent terminal to handle the existing volumes. We foresee greater volumes again next winter.”

Jetstar is scheduled to start a new three-day-a-week service from the Gold Coast in Australia in December, which is likely to attract skiers next winter, while other airlines are expected to advise of their winter services in a couple of months, he said.

The airport company, which is 75.1 percent owned by Queenstown Lakes District Council and 24.9 percent by Auckland International Airport, expects to sign off on plans for a new terminal in the next couple of weeks. It’s expected to be completed by June next year in time for the peak winter season, Paterson said.

The 4080-square metre expansion would expand its terminal by about a third, according to a report in the Otago Daily Times, which cited the building consent application to the council. That would negate the need for the ‘pop-up’ tent, Paterson said.

He declined to comment on the likely cost of the terminal extension as the airport is in the process of tendering for the build. The airport would fund the project through a mixture of cash and debt and already has facilities in place to fund it, he said.

In future years, the airport expects to benefit from after-dark flying in winter, which would reduce congestion around peak daylight hours and encourage weekend leisure travellers from Auckland and Australia in winter.

New Zealand’s Civil Aviation Authority and Australia’s Civil Aviation Safety Authority have given provisional approval to night operations, but they are unlikely to be introduced before winter 2016, Paterson said.

Pacific Edge appoints McKinsey almumni Sitch to board

Pacific Edge, the non-invasive bladder cancer test maker, has appointed former McKinsey & Co consultant Charles Sitch to its board.

Sitch will join the Dunedin-based company’s board on Nov. 1 as an independent director, Pacific Edge said in a statement. Sitch is also a director of Spark New Zealand, and was previously a senior director at McKinsey, working with executives and boards on strategy and operation turnarounds. Pacific Edge hopes his contribution will speed up the global commercialisation of its Cxbladder device.

“The appointment of Charles will add a further dimension to the expertise of the board and his experience working with McKinsey globally brings a very strong strategic capability,” chairman Chris Swann said.

Last month Pacific Edge announced plans to refresh its board to help its drive in the US, with the resignation of 12-year director Colin Dawson. The company is seeking to grow annual revenues to $100 million in the coming years, and this month secured a US patent for a skin cancer test, potentially expanding its range of products.

The shares were unchanged at 92 cents, and have dropped 31 percent this year, after getting caught in a global sell-off of biotech and software stocks.

NZ consumer confidence edges up in September from a 10-month low

New Zealand consumer confidence rose in September from a 10-month low, as households adjust to a more moderate pace of economic growth.

The ANZ-Roy Morgan Consumer Confidence Index rose 2 points to 127.7, paring August’s 7 point drop to 125.5. The current conditions index rose to 124.1 from 123.4 and the future conditions index increased to 130.2 from 126.9.

Almost all indicators in the survey improved, with those saying they were better off financially than a year ago rose to a net 10 percent from 7 percent in August, while those expecting to be better off in a year’s time rose to a net 39 percent, from 35 percent. The only indicator to decline in the survey was household intentions to buy a major item, which fell for a second month to a net 38 percent.

“There is not across the board euphoria, but it is certainly a story of elevation and liveliness,” said Cameron Bagrie, chief economist at ANZ New Zealand Bank. “Consumers appear to be shrugging their shoulders and saying things look okay.”

The survey comes after government figures out yesterday showed growth in annual gross domestic product accelerated to 3.5 percent in the June quarter from 3.3 percent in the March period.

Last week, the Reserve Bank kept the official cash rate on hold at 3.5 percent as it looks to assess the impact of four rate hikes earlier in the year. Past inflation figures have come in lower than the bank expected, as falling commodity prices, a cooling property market in Auckland, in part thanks to loan restriction imposed by the central bank, and a historically high currency have kept upward inflation pressures in check.

“Yes the economy has passed its peak; the latest GDP figures confirm a deceleration in momentum,” Bagrie said. “Correspondingly, confidence measures, for both consumers and businesses, are off their highs. The cycle is now maturing from strong growth rates off lows to moderate growth off good levels”

The September survey shows those expecting New Zealand as a whole will enjoy good economic times in the year ahead rose to a net 24 percent from 20 percent, while looking five years out, it edged up to a net 27 percent from  26 percent.

Respondents expect prices in general to rise 3.9 percent in each of the next two years, up from last month’s 3.3 percent and returning to July’s level. Expectations for house price inflation also returned to July levels, rising to an annual 4.1 percent pace over the next two years, from August’s 3.6 percent.

ASX-listed Vocus declares FX Networks acquisition unconditional

Vocus Communications, the ASX-listed telecommunications company, has declared its $115.8 million acquisition of privately owned New Zealand fibre optic cable network operator FX Networks unconditional.

The Sydney-based company has received acceptances totalling 99.87 percent of FX Networks’ voting stock, with one shareholder holding out, Vocus said in a statement to the ASX. It will look to enforce mop up provisions under the Takeovers Code, having cross the 90 percent threshold, it said.

“Vocus will proceed to settlement of the purchase today,” it said.

The Australian company will pay $62 million, with up to 33 percent paid in cash and the balance in new Vocus shares, and assume $53.7 million of debt. Based on results for calendar 2013, the acquisition would have more than doubled Vocus’s annual revenue to A$136 million and lifted earnings before interest, tax, depreciation and amortisation to A$36.7 million. FX Networks had a net loss of A$900,000 last year because of interest costs from a related party debt, according to a Vocus presentation on the deal.

FX Networks owns and operates a national inter-city fibre optic network in New Zealand and has more than 3,000 clients, according to its website. The company has laid 4,200 kilometres of fibre and has 29 Tb of national capacity, it says.

Shares of Vocus gained 1.1 percent to A$5.54 on the ASX, and have climbed 57 percent this year.

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