MARKET CLOSE: NZX 50 sinks to 9-month low; MHI, PPL, MFT, TEL fall

Friday 21st May 2010

New Zealand shares fell, sending the NZX 50 Index to a nine-month low, as fear of contagion from Europe’s debt crisis and derailment of America’s economic recovery undermined appetite for equities. Jeweller Michael Hill International and children’s clothing chain Pumpkin Patch paced the decline.

The NZX 50 tumbled 61.33, or about 2%, to 3050.08, the sixth straight decline. Within the index, 43 stocks fell, three rose and four were unchanged, marking the session as one of the broadest slumps this year. Turnover was $113.7 million.

The relative strength index, or RSI, of the NZX 50 fell to 14 today on a scale that technical traders say a reading below 20 means a security is poised to rise.

The Standard & Poor’s 500 Index tumbled 3.9% in New York yesterday as fears of a U.S. slowdown added to concern about Europe’s debt, which was fanned this week when Germany imposed a ban on short selling some securities. Some US$5.3 trillion has been wiped off the value of global stocks so far this month, according to Bloomberg.

“You can see the fear out there – fear of the unknown,” said Craig Brown, who manages $1.1 billion of New Zealand equities and ING New Zealand.Brown said the rout in stocks means prices are now “back to levels that fundamentally look attractive.” Judging when to buy “is a bit of the old catching the falling knife – if you time it right you make money buying stocks at these levels.”

APN News & Media, publisher of the NZ Herald, fell 11% to $2.76, the biggest decline on the index.

Michael Hill declined 4.2% to 68 cents and Pumpkin Patch dropped 4.2%to $2.05. Mainfreight, the biggest trucking firm on the NZX 50, fell 3.7% to $6.01.

New Zealand Oil & Gas dropped 3.6% to $1.36 as the crude oil declined. Crude oil for July delivery fell as much as $1.49, or 2.1 percent, to $69.31 a barrel, in electronic trading on the New York Mercantile Exchange, and was at $70.17 at 11:47 a.m. Singapore time. Futures are set for a 2 percent drop this week.

Brown said in the current market, ‘you can afford to look at quality stocks.”

He cited Sky City Entertainment Group and Auckland International Airport as stocks that have fallen enough to make them reasonably attractive.

Sky City edged down 0.3% to $2.92 today and has dropped 8.7% in the past month. Auckland Airport fell 1.6% to $1.88 and has fallen 5.9% in the past four weeks.

Telecom Corp., the biggest phone company on the NZX 50, sank 2.9% to $1.99, its first foray below $2 since before Bill Clinton won the U.S. presidential elections in 1992. The stock has weakened amid uncertainty about how much its local calling network will be eroded by the government’s broadband rollout, which will consider competing b ids to provide the network.

Pike River Coal was the biggest of the three gainers on the NZX 50 today, climbing 1.9% to $1.05. The coal mine developer said today it had completed its $90 million capital raising. Of the pro rata rights issue of $40 million, 72% of Pike’s shareholders took up their entitlements, leaving underwriters led by UBS and the McDouall Stuart Group.

Businesswire.co.nz

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