It's all Telecom's fault, beached stocks wail

By Nicholas Bryant

Friday 16th June 2000

The country's biggest company Telecom is being blamed for holding back the local stock market as an eclectic bunch of stocks enjoyed a spike in their share prices this week.

Fletcher Challenge Energy, Affco and Contact were among a diverse group which saw their share prices rise significantly but commentators said it was not a sign of a pan-market confidence boost.

"The main index is stuck in a rut primarily because Telecom is really struggling to perform and that negates a lot of other moves," Cavill White Securities managing director Don Turkington said. Telecom accounts for a third of the NZSE's capitalisation.

Telecom's struggle has been associated with its declining core earnings and increased competition, changes which have seen its share price slip 22% from $9.80 to $7.65 in the last eight weeks.

Dr Turkington said among other stocks restructuring and takeover activity had picked up while commodity stocks with an agricultural bent had also fared well.

"It's very much a stock pickers market, if you happened to have struck on a theme then you've done okay - this is pretty indicative of a market that's still struggling," he said.

The Frucor offering, which closed this week, showed private investors were wary.

"When you get a float that's got a bottom of the indicative range of $1.95 and the demand can only justify $1.50, that tells you volumes," one analyst said.

Negative international attention, such as the Independent Strategy report, had also not helped the market.

"We've copped an enormous amount of negative press internationally as the government is seen to be pursuing an independent course from other centre left governments worldwide," Dr Turkington said.

Since May Affco was up 27% to trade at 46 cents this week, Contact Energy was up 29% to $3.07 and Fletcher Challenge Energy was up 27% on the back of its court win and Pohukura announcement.

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