The share market pushed higher to a new record high today, the NZX50 index gaining 7.8 points to 5,478.14 by midday.
Here are four reasons why:
Investors turning to high dividend yield stocks:
The interest rate markets have not been a happy hunting ground for investors. Inflation, which came it at just 1.0 per cent for the September year, is low which means there is no immediate need for the Reserve Bank to start raising its official cash rate. Low official rates mean low retail rates. Six-month bank deposits are offering about 4 per cent interest while the average dividend yield for the share market is 6 per cent.
Dividend yield:
The high dividend yield story can be seen with the likes of the power generators, which typically offer little growth but which offer investors income through their dividend stream. High yield stocks - particularly the newly-listed power generators, have rallied strongly since the emphatic win by the National Party in the September 20 general election removed the threat posed by the Labour Party and the Greens of intervention in the electricity market. Mighty River Power, Genesis Energy and Meridian have all posted double digit percentage gains in their share price over the last 30 days.
The US market:
The United States, by far the world's biggest economy, sets the scene for equities markets. Wall Street has been on a record breaking run, due in part to the very low cost of funding, with official interest rates there still at near zero, but also due to a resurgence in corporate earnings. The focus in the US has been on the jobs market, and labour data out last week showed unemployment was at its lowest point since July 2008.
Economic sweet spot:
The New Zealand economy is in the unusual position of enjoying strong growth - GDP gained 3.5 per cent in the June year - but without the usual inflationary pressures that go with that. This is good news for corporate earnings. At the same time, there been a general strengthening of balance sheets in recent years.
By Jamie Gray, NZME. Business Reporter
