MARKET CLOSE: Shares fall; Michael Hill, F&P Appliances slide

Wednesday 11th February 2009

New Zealand shares fell after a report showed a slump in Australian consumer confidence, weighing on companies with revenue across the Tasman, such as jewellery chain Michael Hill International.

The NZX 50 Index fell 19.825, or 0.7%, to 2730.225 as at the 5 p.m. close of trading in Wellington. Within the index, 26 stocks fell, 10 rose and 14 were unchanged. Turnover was about NZ$75 million.

Michael Hill fell 3.8% to 51 cents after the Westpac Banking Corporation and Melbourne Australian consumer sentiment index for January showed confidence sank 4.6% to 85.8 points. A reading below 100 indicates pessimists outnumber optimists, which has been the case since February last year. Australian foodmaker Goodman Fielder declined 1.7% to NZ$1.70.

Australian consumers "are unusually fearful of the future," said Bill Evans, Westpac chief economist, in an e-mailed statement.

New Zealand shares also followed Wall Street lower after the Dow Jones Industrial Average tumbled 4.6% to 7888.88 yesterday, in the biggest slump since President Barack Obama's inauguration. Bank of America plunged 19% and Citigroup was down 15% on disappointment Treasury Secretary Timothy Geithner didn't give more details of the revamped bank rescue package which will soak up toxic bank debt and provide funds for consumer lending.

Australia & New Zealand Banking Group shares fell 1.4% to NZ$15.19 and insurer AMP Ltd. dropped 1.3% to NZ$6.28.

Fisher & Paykel Appliances dropped 3.6% to a record low NZ$1.08 and is down 16% in the past month. The shares have slid this week after Whirlpool Corp, the world's biggest appliances maker and its distribution and technology partner, posted a slump in earnings and chief executive Jeff Fettig said the global slowdown "had a significant impact on consumer demand in all parts of the world."

Christchurch-based department store Smiths City fell 9.1% to 30 cents, clothing chain Postie Plus Group dropped 6.7% to 28 cents and Hallenstein Glasson Holdings slipped 0.5% to NZ$2.21 after government figures showed credit and debit card transactions at retailers declined 0.2% last month.

Wellington department store Kirkcaldie & Stains was untraded after its announcement late yesterday that first-half profit may tumble 50%, reflecting a tough retail market.

Telecom, which is expected to report a drop in second-quarter earnings from last year's NZ$172 million on higher costs and loss of customers from its fixed-line network, fell 1.5% to NZ$2.59.

With the prospects of a weaker earnings season "a lot of it is factored in already" to stock prices, said Paul Richardson, chief investment officer at BT Funds Management. There's still a possibility for "the odd few shocks," he said.

Fletcher Building dropped 0.4% to NZ$5.50 even after the government announced NZ$500 million of fast-tracked infrastructure spending on transport projects, school buildings and state housing. The nation's biggest construction company tomorrow is expected to post a 20% drop in first-half earnings.

Australian building supplies rival Boral Ltd, that nation's biggest seller of building materials, today posted a 44% slump in first-half profit, citing weaker demand in the U.S., Australia and Asia. Its shares were unchanged at A$3.08 on the ASX.

The S&P/ASX 200 Index fell 0.4% to 3474.4 in Sydney. Printing and publishing company PMP dropped 19% to 35.5 cents after posting a first-half loss of A$11 million and omitting its dividend.

BHP Billiton fell 2.9% to A$32.37 after prices of metals fell. Commonwealth Bank of Australia rose 1.1% to A$29.92 after that nation's second-biggest lender said it may have to trim dividends as bad debts rise and cash earnings decline. Net income climbed 9% to A$2.57 billion on a gain from its purchase of HBOS Plc's BankWest unit, the lender said in a statement today.

Rio Tinto rose 6.2% to A$52 on reports that Aluminum Corp. of China is seeking to acquire a stake in the company. The Chinese company may invest as much as $20 billion in Rio to gain more access to commodities, Bloomberg said, citing a person familiar with the situation.

In Tokyo, the Nikkei 225 Index fell 0.3% to 7945.94. Kobe Steel fell 13% and Nissan Motor climbed 7.3%.

BT's Richardson said volatility in markets and sliding stock prices have "presented some long-run investment opportunities" with some companies now trading at favourable price-to-earnings rations. Some 16 stocks on the NZX 50 are trading at less than eight times earnings.

"This is when you show your stripes as an investor," Richardson said. "You don't get too many opportunities to acquire businesses very cheaply."

Based on their most recent earnings, New Zealand Oil & Gas is trading at a PE ratio of just 3.8 and Guinness Peat Group is at 3.45. Guinness Peat was unchanged today at 83 cents and NZOG fell 1.4% to NZ$1.38.

Richardson said there are signs that a recovery process in equity markets is underway. Some A$38 billion of capital raisings by Australian companies has been soaked up and will be used to restore corporate balance sheets. New Zealand balance sheets "are not too badly off," he said.

"It does show you that markets have opened up again," he said.

Last year was one of the worst on record for shares, based on the Standard & Poor's 500 Index, with the slump about matching the decline in 1930 and 1931. That was followed in 1933 by one of the biggest rallies in history, according to Richardson.

(Businesswire.co.nz)

Businesswire.co.nz

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