MARKET UPDATE: NZ shares fall, F&P Appliances slides

Thursday 15th January 2009

New Zealand shares fell, sending the NZX 50 Index to its first drop in five sessions, as further signs of a prolonged worldwide slump drove down equities from Tokyo to London and New York.

The NZX 50 fell 31.386, or 1.1%, to 2755.386 in early afternoon trading. Within the index, 28 stocks declined, 10 rose and 12 were unchanged. The local benchmark lagged behind the decline in the Standard & Poor's 500 Index, which dropped 3.4% overnight after figures showed a slump in US retail sales, stoking concern about a prolonged recession.

Fisher & Paykel Appliances, which depends on consumer demand for its cookers, washers and fridges in the US, Australia and New Zealand, fell 3.6% to $1.34, extending its 12-month slide to 52%. Telecom fell 3.6% to $2.39 and carpet maker Cavalier fell 2.6% to $2.56.

The New Zealand benchmark fell less today than indexes in Tokyo, Hong Kong and Australia - all down more than 3% - reflecting the New Zealand bourse's lack of exposure to commodity and cyclical stocks and the nation's backwater status, according to Barry Lindsay, research manager at First NZ Capital.

BHP Billiton, the world's largest mining company, and Rio Tinto helped drive the S&P/ASX 200 Index down 3.6% in mid-day trading as figures showing weak US retail sales fueled concern about the downturn and weighed on prices of commodities such as copper. The Nikkei 225 Index fell nearly 4% in early trading in Tokyo as Japanese machinery orders fell more than expected. In Hong Kong, the Hang Seng fell 4.3%.

New Zealand's market is "somewhat defensive" because its biggest stocks include a phone company, Telecom, and a utility, Contact Energy, First NZ Capital's Lindsay said. "We're in a better position than Australia, with less exposure to commodity stocks. When things go off the boil they suffer materially - it plays on global growth."

The market may also be somewhat sheltered by turmoil in larger markets, which has diverted the attention of overseas investors, Lindsay said. Activity is New Zealand shares may also be down among Australian investors because of the amount of capital raising by companies across the Tasman in the past few months, including A$10 billion by the biggest three banks and a similar amount by listed property trusts, he said.

Meantime, Prime Minister John Key held a meeting of senior ministers today to discuss the deteriorating economy and said a briefing from the Treasury flagged the prospect that growth won't revive this year after the first recession in a decade.

Air New Zealand fell 2.2% to 91 cents amid concern the global downturn will reduce demand for travel.

The outlook for tourist arrivals this year is "challenging," Shamubeel Eaqub, economist at Goldman Sachs JBWere said in a report today. While a weaker kiwi dollar will provide some offset to the impact of global recession, Eaqub forecasts visitor arrivals to fall 5.3% in 2009 and 0.2% in 2010.

The New Zealand dollar tumbled to 53.55 US cents today from 55.19 cents yesterday after a slump in US retail sales and weaker economic data from Europe drove down stocks and sapped demand for higher yielding, or riskier investments.

Companies that benefit from a weaker currency were among the biggest gainers today. Fisher & Paykel Healthcare, which gets 80% of its revenue in US dollars, rose 1.9% to $3.30.

The manufacturer of breathing masks and respirators "is going to do exceedingly well this year profit-wise," Lindsay said.

Sanford, which catches and exports fish, climbed 1.3% to $5.32.

By Jonathan Underhill

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