Market Close: NZ stocks fall; Rakon, Pumpkin Patch slide

Tuesday 18th November 2008

New Zealand stocks fell, with the NZX 50 declining for the fifth day in six, as Rakon extended its slide after posting a slump in profit while retailer Pumpkin Patch fell after predicting weaker 2009 earnings.

The NZX 50 Index fell 27.327, or 1%, to 2714.588. Within the index, 29 stocks fell, 14 rose and seven were unchanged. Rakon, which makes components for navigation systems, dropped 6.3% to NZ$1.04 and has shed more than a third of its value since announcing the earnings drop and weaker outlook on Nov. 14.

Pumpkin Patch declined 6% to 94 cents after chief executive Maurice Prendergast told shareholders that 2009 earnings would weaken in Australia and New Zealand after an “extremely difficult” first quarter. The result add to signs that the economic slump is eroding corporate profits, adding to worldwide negative sentiment about equities in the face of the ongoing credit freeze and company failures.

“It is virtually impossible to make any predictions or forecasts for the New Zealand market or its component companies, since the economic outlook is uncertain and investor behaviour is unpredictable,” said Carmel Fisher, managing director of Fisher Funds Management.

The decline in New Zealand shares was milder than across the Tasman, where the S&P/ASX 200 Index dropped 3.5% to 3523.2, led by resource companies Newcrest Mining and Rio Tinto. Macquarie Group jumped almost 18% even after posting a slump in earnings, amid relief it didn’t announce plans to raise more capital. The Nikkei 225 Index fell 2.5% in mid-day trading to 8328.41 as exporters and Softbank tumbled.

Carmel Fisher’s Fisher Funds manages Kingfish Ltd., an investor in smaller New Zealand companies which today posted its second six-monthly decline in net asset value in the face of a rout in stocks that has driven down prices worldwide. Kingfish rose 3.7% to 84 cents today. Kingfish’s biggest investments are Ryman Healthcare, Mainfreight, Metlifecare, Freightways, Michael Hill International and winemaker Delegat’s.

Fletcher Building rose 1.4% to NZ$5.72 after reports that the nation’s biggest construction company will eliminate jobs with the closure of its Plyco Select plant in Auckland. A union delegate said 80 jobs would go, though the company said it hasn’t made a final decision.

Clothing chain Hallenstein Glasson Holdings fell 0.9% to NZ$2.28 after the company delayed plans to establish a buying team to Melbourne citing "very difficult" retail conditions. The retailer, whose shares are down 40% this year, will focus on establishing an Auckland buying centre instead.

Brewer Lion Nathan Ltd., whose takeover offer for Coca-Cola Amatil has been pooh-poohed by the target, fell 2.8% to NZ$9.92 after reporting a 3.3% decline in annual profit on costs to upgrade plants and the acquisition of rival beer company J Boag & Son.

New Zealand’s recession may drag on into 2009, Goldman Sachs JBWere economist Shamubeel Eaqub said this week as global growth falters and ‘second round’ effects of a recession bite, including more job losses.

Fisher Funds’ Fisher said historically, share markets typically rebound after downturns before the underlying economies revive.

“The fact that our portfolio companies are resilient and are continuing their long-term profit performance should bode well for a re-rating when investor confidence returns,” Fisher said in her overview of Kingfish. “The big unknown is timing and while many commentators are suggesting that a market bottom is nigh, it is impossible to predict the exact timing,” she said.

(Businesswire.co.nz)

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Last updated: 18/11/2008 5:08pm

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