MARKET CLOSE: NZ stocks fall, led by ANZ Bank, Fletcher

Friday 23rd January 2009

New Zealand shares fell as companies in the U.S., Europe and Asia reported weaker earnings, adding to economic figures worldwide that point to a more prolonged slump.

In the past 24 hours, companies including Microsoft, Nokia and Sony have reported or flagged earnings that disappointed investors, while China posted weaker economic growth, jobless claims rose in the U.S. and Japanese exports slumped.

The NZX 50 Index fell 29.325, or 1.1%, to 2705.086. Within the index, 27 stocks fell, seven rose and 16 were unchanged. Turnover was about NZ$82 million, according to Reuters data.

Australian & New Zealand Banking Group fell 8.5% to NZ$14.95, leading the NZXZ 50 lower, while Westpac Banking Corp. fell 2.9% to NZ$18.70, tracking a drop in Australian lenders on the ASX.

"For many financial institutions, their solvency was heavily tested last year," said Angus Gluskie, who helps oversee about US$300 million at White Funds Management in Sydney.

"There's still likely to be more mortgage losses for those financial institutions into 2009," he said. Increasingly they may be joined by corporate loan defaults as the recession bites more companies, he said.

Australian insurer AMP Ltd. dropped 8% to NZ$6.07 while food-maker Goodman Fielder declined 5% to NZ$1.90.

Fletcher Building, which owns the U.S. based Formica laminates business, fell 3.5% to NZ$5.55 after U.S. Commerce Department figures showed housing starts tumbled 15.5%, seasonally adjusted, to an annual rate of 550,000 units in December, the lowest level since records began in 1959.

In New Zealand, house prices may continue to slide through 2009 as the jobless rate climbs, cooling demand for property, according to ANZ Bank's Property Focus. Steel & Tube Holdings, which sells steel building products such as reinforcing rods, fell 0.7% to NZ$2.83.

Robin Clements, chief economist at UBS New Zealand, today cut his estimates for economic growth for the fourth quarter and the current three months by a cumulative 0.8%, predicting a five-quarters-long recession. He's among the majority of analysts predicting a 100 basis points cut in the official cash rate next week. Still, he says, the market will not be surprised if Governor Alan Bollard makes a deeper cut on Jan. 29.

"The deciding factor may come down to tactics - keeping some ammunition in reserve or frontloading easing as quickly as possible," Clements said in a report today.

The New Zealand dollar was at about 52.86 U.S. cents as at 5 p.m. in Sydney.

OceanaGold Corp., New Zealand's biggest gold miner and operator of the Macraes goldfield, dropped 6.3% to 45 cents as the price of gold fell. Gold for February delivery fell 0.6% to US$853.30 an ounce on the New York Mercantile Exchange.

The gold miner today said a jump in its stock price this month may reflect a surge in the price of gold in kiwi dollars and a Merrill Lynch report that said the company was the cheapest gold miner it covered. Its shares, which are listed in New Zealand, Australia and Toronto, jumped 43% to 40 cents on the ASX between January 16 and January 28 while trading volumes rose, prompting a query from the exchange.

Port of Tauranga fell about 5% to NZ$5.90 and Skellerup Holdings shed 4.1% to 70 cents.

Contact Energy, the biggest utility on the NZX 50, fell 1.5% to NZ$6.66 after it was cut to 'hold' from 'buy' at Goldman Sachs JBWere following the company's warning this week that underlying earnings would fall as much as 23% this year because of transmission constraints, higher gas costs and a drop in generation.

New Zealand shares had a gentler decline than those in Australia, where the S&P/ASX 200 Index dropped 4% amid a slide in banks and resources companies. Alumina dropped 11% to A$1.17, BHP Billiton fell 5.8% to A$27.45 and Rio Tinto fell 1.9% to A$38.06.

National Australia Bank declined 6.5% to A$16.94 and Commonwealth Bank fell about 6% to A$24.07.

In Tokyo, the Nikkei 225 Index fell 3.3% to 7783.34 in afternoon trading as Sony fell 6.7% and Pioneer dropped 8%.

"There's no doubt that stocks are cheap on a valuation basis but there's a big allowance in for protective measures," White Funds' Gluskie said. "Financial damage is occurring to investors as companies are forced to recapitalise at very low prices."

"It is reasonably prudent to have a fair bit of money off the table and on the sidelines," Gluskie said. "But as it continues to plunge into this extreme weakness" there may be a case for buying some stocks, he said.

(Businesswire.co.nz)

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