MARKET CLOSE: Stocks fall; Cavalier, Nuplex slide

Monday 2nd March 2009

New Zealand stocks fell, pushing the NZX 50 Index to a new five-year low, as a slump in Europe and the U.S. extended into Asia and investors marked down companies with relatively high debt levels.

The NZX 50 fell 40.802, or 1.6%, to 2481.52. Within the index, 30 stocks fell, 10 rose and 10 were unchanged. Turnover was NZ$67 million.

Carpet maker Cavalier fell 9.8% to NZ$1.20, the lowest since 1998, extending its slide since Feb. 20 when it said annual profit may drop as much as 40%. Nuplex Industries declined 3.3% to NZ$1.18, the lowest level since 1992. The specialty chemicals company has tumbled since announcing to was in talks with banks to mitigate a breach of loan terms.

"Debt amplifies earnings movements - it increases the upside in good times and the downside in recessions," said Brian Gaynor, who helps manage NZ$250 million at Milford Assets Management, in a report.

Competition for funds helps explain the proliferation of corporate bond sales as companies become "increasingly frustrated" with banks' unwillingness to extend credit, he said.

Contact Energy, the biggest utility on the NZX 50, fell 4% to NZ$5.71. The power company today began the sale of at least NZ$300 million of 5-year bonds paying 8% interest, raising funds for new generating capacity and to repay debt.

PGG Wrightson climbed 8.8% to 99 cents, adding to a 15% jump on Friday, after the rural services company said it would maintain its dividend, easing concern that major shareholders may dump their stock to raise funds, and gained an extension on its loan facilities.

Guinness Peat Group fell 8.3% to 55 cents, adding to Friday's 13% slide after the investment company chaired by Ron Brierley posted a full-year loss as it wrote down the value of its portfolio and its Coats threadmaker unit was hit by the economic downturn.

Wellington Drive Technologies rose 0.9% to 10.8% after the maker of energy-efficient motors said it raised NZ$10.8 million in a placement and offer of rights, edging nearer its target of NZ$11.4 million.

Sanford, the fish exporter, gained 2.8% to NZ$5.50 as the New Zealand dollar held below 50 U.S. cents, near a seven-year low, swelling the value of its export sales. Fisher & Paykel Healthcare, which gets 80% of its revenue in U.S. dollars, rose 0.3% to NZ$3.35 and is up 6% this year.

Tourism Holdings jumped 22% to 55 cents, leading the NZX 50 higher, though only 1,000 shares changed hands at that level of a total volume of 6,688. The shares are down 33% this year.

Businesswire.co.nz

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