Market barometer: Market mergers shaky as brokers see businesses escaping

Friday 2nd February 2001

Sharemarkets are showing mixed behaviour in the face of investor uncertainty. Companies are expected to produce lower profits in a slowing world economy and in turn to be affected in dividend payouts.

The implications of US interest rate decisions for sharemarkets and monetary policies of central banks will be weighing on investors' minds.

The future direction of sharemarkets will remain a focus of interest over this year. The proposed merger of the ASX and NZSE has been reported as losing popularity with smaller local brokers concerned that much of their business will migrate to Australia.

Much the same concerns torpedoed last year's proposed merger between the London and Frankfurt stock exchanges. Smaller British stockbrokers killed the deal on a vote because they feared the Germans would capture a lot of their business. Nonetheless, the question of stockmarket mergers and acquisitions will not go away, because of a global trend towards amalgamation.

Currency exchange rates could have some bearing on sharemarket movements. The New Zealand dollar/US dollar spot rate has slipped, which could scare off foreign investors from our hesitantly recovering sharemarket.

The euro seems to have fallen back from its lift against the US dollar, which could dampen US hopes of maintaining exports and profits in trade with Europe. The US dollar in turn seems to have stopped its rise against the yen.

Corporate plays can be expected to continue in our sharemarket as investors take advantage of the desire of some significant shareholders to quit their positions in New Zealand.

Weakening major shares are Telecom, back down to about 550cps, and Carter Holt Harvey at 155cps. Baycorp is making progress around $13 and INL has jumped to the 360cps mark.

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