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MARKET CLOSE: NZ stocks fall on global jitters; GPG, Telecom decline

Thursday 17th June 2010

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New Zealand stocks fell, snapping a six day advance, as the market took its lead from the US which ended on a mixed note after the release of weak housing market data.

The NZX 50 dropped 20.85 points, or 0.68%, to 3052.73. Within the index 15 stocks rose, 25 fell and 10 were unchanged. Turnover was $80.9 million.

The tone for the day was set when the US government released weaker than expected housing statistics for May, which overshadowed better than expected industrial data earlier in the month.  The Standard & Poor’s 500 Index slipped 0.1%. Equity markets were mixed in Asia, with Japan’s Nikkei 225 Index falling 0.6%, while Hong Kong’s Hang Seng rose 0.3% and the Straits Times Index in Singapore was down 0.3%.

“Undoubtedly these weaker stats have offset the positive business and consumer stats that have come out recently, but they are a reminder that not all is running as strongly as we would like it and that the economy is still a bit fragile,” said Shane Solly, portfolio manager for Mint Asset Management.

“New Zealand still remains pretty attractive as an equity market, with most company balance sheets in good order, good dividend yields and the potential for revenue growth, so overall we’re not too concerned about the global news,” Solly said.

Guinness Peat Group (NZX: GPG ) sank 4.6% to 63 cents, touching an 11-month low after investors reacted to news that it was spinning off its Australia assets into a separate listed business.

“Some people in the market were expecting a better return of capital,” Solly said. “However there is still some room for optimism on the Coats side of the business in terms of their long-term prospects. It is just going to take a little longer for them to deliver.”

Sky Network Television (NZX: SKT ) fell 1.7% to $2.85 after major shareholder News Corp's bid for the rest of its British counterpart, BSkyB, was rejected.

Telecom (NZX: TEL ) continued this month’s decline, falling 3% to $1.68 on news that the government looks set to enforce greater competition in the mobile phone market.

Kathmandu (NZX: KMD ), the outdoor clothing retailer, rose 2.5% up at $2.05, as customers flocked to the store on the back of a cold winter.

“We seem equity markets in general as being overly sold,” Mint’s Solly said. “Investors are overly cautious, and this is not unreasonable. But we feel that they are being overly negative and that the market is being overly penalized by what has happened in Europe,” he said.

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