Market close: NZX 50 pares gain on outlook for waning profits

Monday 13th October 2008

The NZX 50 Index fell 0.8%, paring an earlier gain, amid concern measures such as a government guarantee of bank deposits won't help lift corporate earnings in a slowing economy.

The NZX 50 fell 22.921 to 2782.393 at the 5 p.m. close of trading in Wellington. Telecom Corp. Contact Energy Ltd. and Fletcher Building Ltd., the three largest stocks on the index, all fell.

The benchmark index has dropped 30% this year, or about 17% in the past month, and now trades at about 15 times earnings. That’s still higher than Australia’s S&P/ASX 200 Index, at a P/E of about 11.

The New Zealand market “is not unbelievably cheap,” said Barry Lindsay, research manager at First NZ Capital. Next year and 2010 “are not going to be a great period for corporate earnings.”

The ASX 200 index was up about 6% though some financials surged. Babcock & Brown Ltd. jumped 38% to A$1.39 and ANZ Bank rose 10% to A$16.90 as Australia’s guarantee of bank deposits eased fears about sudden loss of confidence. The nation’s big four banks, ANZ, National Australia, Commonwealth and Westpac led the index higher.

“Australia, on earnings, looks relatively attractive,” Lindsay said.

ANZ Bank’s New Zealand shares rose about 6% to NZ$18.30.

Air New Zealand fell 4.4% to 86 cents after Auckland International Airport said Jetstar, the Qantas Airways unit, will begin return flights linking Auckland with Sydney and the Gold Coast. The new Jetstar service adds 258,000 seats a year to routes where Air New Zealand competes, based on the airport company’s figures.

Infratil Ltd. rose 3.2% to NZ$1.95. The investment company managed by Morrison & Co. put out an update today saying 30,000 people in Wellington have signed up for its Snapper card, which acts as a swipe on buses and can carry credits redeemable at other outlets. Snapper could be applied to contracts in other cities.

Telecom fell 3% to NZ$2.48. The stock is yielding almost 17% on dividend payments since tumbling this year. Its P/E is 6.7. Contact Energy fell 2.1% to NZ$7.05 (P/E 18). Fletcher Building dropped 0.2% to NZ$5.85.

New Zealand’s dollar fell about one U.S. cent and weakened against the yen, amid speculation more Japanese funds may be taken home as investors favour cash over sliding global equities.
A declining currency tends to make overseas investors wary about a nation’s assets.

Japanese 10-year government bonds are yielding 1.54%, less than half the 3.88 yield on 10-year Treasuries. The Nikkei 225 Index was down more than 9% today.

NZ Top 50	2,782.393	-22.921 (-0.82%)
ASX 200	4,180.700	+220.000 (+5.55%)
Dow	8,451.19	-128.00 (-1.49%)
Nasdaq	1,649.51	+4.39 (+0.27%)
FTSE 100	3,932.06	-381.74 (-8.85%)

Last updated: 13/10/2008 5:09pm

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