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Market Close: NZX 50 falls; Pike River, Sky TV decline

Thursday 6th November 2008

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New Zealand shares fell, with the NZX 50 Index erasing most of yesterday's gains, as the prospects of a global recession hurt Pike River Coal and New Zealand Oil & Gas, and Sky Network Television trimmed its profit forecast.

The NZX 50 fell 45.98, or 1.6%, to 2840.13, the second decline in seven sessions. The media & telecommunications sub-index charted the biggest slide, falling 4.9% on as Sky TV and Telecom dropped. The NZSE Mining Index fell 3.6% on a slump in Heritage Gold and lower prices for Pike River, which is preparing to mine coking coal, and NZOG.

Coking coal contract prices may fall 57% next year as Asian steelmakers reduce output, according to analysts at BNP Paribas. Crude oil fell, bringing its two-day slide to more than 8% on rising inventories of petrol in the U.S. Shares fell across Asia, extending a slump in Europe and the U.S. In Australia, BHP Billiton, Rio Tinto and Woodside Petroleum were among leading decliners.

"We don't think we can predict how volatile overseas markets will be," said Guy Elliffe, who manages about NZ$750 million of New Zealand shares at AMP Capital Investors.

"We don't expect a sudden rebound but selected quality companies are quite attractive," he said. "We tend to be buyers on the bad days."

Pike River, which reached its coal target at its South Island mine with minimal disruptions and has locked-in contracts to sell some of the output, fell 5.4% to NZ$1.23. NZOG declined 2.9% to NZ$1.36. It has cash and Pike shares worth 85% of the stock price, according to Salvus Strategic Investments in a Nov. 4 report, the day NZOG was at NZ$1.30. That probably doesn't leave enough share value to account for the Tui oilfield and Kupe, whose output already has a buyer in Vector Ltd.

Sky TV declined 6% to NZ$3.85 after chief executive John Fellet said profit may decline this year on increased costs for MY SKY decoders and depreciation. That's based on slides for a presentations to shareholders.

Profit will be in a range of NZ$90 million to NZ$100 million, from NZ$98 million last year. Depreciation will rise to NZ$90 million to NZ$95 million, from NZ$78 million, according to the presentation. SKY's shares have fallen about the same amount as the NZX 50 this year, a decline of 30%.

Telecom fell 3.8% to NZ$2.27. Its low is NZ$2.21 on Oct. 29. The Commerce Commission today said it will investigate whether mobile termination access, the terms of network-to-network calls and messages should be regulated. Telecom and Vodafone Group Plc dominate the nation's mobile phone market. A number of smaller providers support the probe.

AMP's Elliffe said he favours companies that stand to benefit from a weaker New Zealand dollar. He declined to discuss specific stocks other than to note that the downgrade by Sky TV, which benefits from a stronger currency, was "modest."

Meat exporter AFFCO Holdings has fallen 18% in the past three months and was unchanged at 46 cents today. Fisher & Paykel Healthcare, which gets the largest portion of its revenue in U.S. dollars, fell 1.6% to NZ$3.08. F&P Appliances was unchanged at NZ$1.55. The stock has about matched the NZX 50 in the past month.


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