MARKET CLOSE: NZX50 slips as investors prepare for Fletcher

Wednesday 1st April 2009

Shares fell, pushing the NZX 50 Index lower for a third straight session, as investors freed up cash to participate in Fletcher Building equity raising at a discount.

The NZX 50 fell 21.15, or 0.8%, to 2569.24. Within the index, 26 stocks fell, 15 rose and nine were unchanged. Turnover was NZ$76.3 million. Guinness Peat Group fell 5.3% to 72 cents, leading the index lower. Vector declined 6% to $2.14 and Freightways dropped 5.8% to $2.78.

Fletcher's stock was halted while it raises as much as $505 million. The company will raise $405 million in an underwritten placement to institutions and a further $100 million by way of a share purchase plan for existing shareholders, with a top-up of as much as $20 million.

"Fletcher is taking cash out of the market," said Ian Waddell, managing principal at brokerage Waddell Johnston McCarthy. "People are selling a little bit" to take up the shares.

The Fletcher sale is seen as opportunistic, getting a sale away ahead of potentially more Australian companies tapping the market for funds and benefiting from the stock's 18% gain in the past month.

The sale comes "at a time when they can get a decent level of support from Australian shareholders," said Mark Lister, head of research at ABN AMRO Craigs. "It's probably a decent-sized discount - enough to have it well supported," he said. It compares favourably with the "whopping huge discount" Nuplex Industries offered last month, he said.

Nuplex rose 8% to 81 cents today, the biggest advance on the NZX 50. The specialty chemicals manufacturer was forced to offer shares at less than a quarter of the trading price to tempt institutions. Shareholders are entitled to seven shares at 23 cents apiece for every one held. Skellerup Holdings gained 10% to 65 cents.

Shares didn't move much after the New Zealand dollar tumbled this morning on a statement from the central bank.

Reserve Bank Governor Alan Bollard said the rise in long-term interest rates is "out of line" with the bank's expectations, given any recovery in economic growth is likely to be gradual. The New Zealand dollar has tumbled to 55.68 U.S. cents from 57.05 cents before Bollard's statement. The yield on 3-month bank bills fell 11 basis points.

Fisher & Paykel Healthcare, which gets 80% of its revenue in U.S. dollars, fell 0.6% to $3.14. Rakon, which makes components for navigation systems and gets sales in the U.S. and Europe, rose 0.8% to $1.22. Fishing company Sanford was unchanged at $5.65.

Jeweller Michael Hill International rose 8.9% to 49 cents and Tourism Holdings, which depends on inbound tourists hiring its campervans, rose 9.5% to 46 cents.

Sealegs, the manufacturer of amphibious boats, gained 5.3% to 10 cents after the company cancelled 12 million employee share options. The shares have declined 66% in the past six months.

"Despite the company's continued revenue growth, factors including the recent worldwide economic downturn mean the options have not been successful in creating value or incentive for employees," it said.

Businesswire.co.nz

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