MARKET CLOSE: Shares fall a 2nd day as swap rates spike

Thursday 26th March 2009

Shares fell, pushing the NZX 50 Index lower for a second session, as rising swap rates dimmed the appeal of equities and investors await data that may show the economy deteriorated in the fourth quarter.

The NZX 50 fell 14.07, or 0.5%, to 2616.25. Within the index, 25 stocks fell, 16 gained and nine were unchanged. Turnover was NZ$66.6 million.

Food and ingredients company Goodman Fielder fell 4.6% to $1.26, leading the NZX 50 lower. Telstra Corp. fell 3.5% to $3.85. Among New Zealand-based companies on the NZX, clothing retailer Hallenstein Glasson Holdings declined 3.4% to $2.30 and Warehouse Group fell 2.5% to $3.58. The five-year swap rate surged as much as 1 percentage point, reaching 5.3% and was last at 5.05%.

"The spike in swap rates this week has been quite dramatic," said Barry Lindsay, research manager at First NZ Capital. "Higher interest rates are not good for equities."

Lindsay said the jump in swap rates is linked to the flow of investors swapping out of variable interest rates into fixed amid bets long-term fixed rates are set to rise.

Skellerup Holdings fell about 3% to 65 cents and Guinness Peat Group declined 2.7% to 73 cents.

Government figures tomorrow are expected to show the economy shrank 1% in the fourth quarter as the economy remains mired in a recession some economists say will last six quarters.

Air New Zealand fell 2.2% to 89 cents. Some 250 members of the Engineering, Printing and Manufacturing Union are considering the stop-work, affecting flights across the Tasman and on Pacific routes over the Easter break.

Australia and New Zealand Banking Group rose 5% to $21 after the lender announced plans to expand into China, opening over 20 branches by 2012. "With the significant slowdown in the US and European economies, the importance of China and Asia to the future of the world economy is now more obvious than ever," chief executive Mike Smith said in a statement

Pike River Coal rose 7.5% to 86 cents. Some investors may be positioning themselves ahead of the miner's rights offer, Lindsay said. The issue, to raise $41 million for working capital and repairs to a ventilation shaft, includes a free option with each share. The record date is March 30.

Fisher & Paykel Appliances rose 19% to 51 cents, leading the index higher, as some investors deemed the prospects of a capital raising a safer course after Nuplex Industries completed terms of a share issue.

Nuplex jumped 17% to $1.03.

Businesswire.co.nz

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