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MARKET CLOSE: New Zealand stocks fall on back of global worries

Thursday 12th August 2010

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New Zealand stocks fell for a third straight day, broadsided overnight by global markets tumbling precipitously after already-spooked investors fled equities on fears economic growth and corporate earnings will stall.

Telstra (NZX: TLS ) led declines after reporting a slump in its business market.

The NZX 50 fell 29.1 points, or 1%, to 3006.9. Within the index, 33 stocks fell, three rose and 14 unchanged. Turnover was $55.9 million.

Overnight the Federal Reserve sent jitters through the global investment community after its expressed concerns about the pace of recovery in US output and employment, which has slowed in recent months.

Asian stocks traded lower across the board, with Japan’s Nikkei 225 down 1.3% to 9169, Hong Kong’s Hang Seng down 1.5% to 20977, Singapore’s Straits Times Index down 1% to 2920, and South Korea’s KOSPI down 1% to 1740.

“The announcement has certainly taken some of the wind out of the sails of the global recovery, with other countries also downgrading their economic outlook,” said Keith Poore, head of investment strategy for AXA Global Investors. “The recovery is still in place though, especially if you look at US corporate earnings as the backdrop, up 50% on last year, with sales up 10%.”

Telstra, the dual-listed telecommunications company, fell 9.7% to $3.73 after it posted weaker annual profit. Earnings before interest, taxation, depreciation and amortisation of $157 million in the year ended June 30, compared to $159 million a year ago.

Telecom (NZX: TEL ) fell 1.5% to $2.01.

Kathmandu (NZX: KMD ) fell 4.7% to $1.61, New Zealand Oil & Gas (NZX: NZO ), the energy exploration and mining company, fell 3.2% to $1.20 and financial services company Pyne Gould (NZX: PGC ) fell 2.4% to 40 cents.

Shares in Steel & Tube (NZX: STH ), which supplies steel products to the construction industry, fell 3.2% to $2.15 after it posted a 78% slump in full-year profit as a lacklustre construction sector weighed on demand. The Wellington-based company made a net profit of $5.7 million, or 6.5 cents per share, in the year ended June 30, compared to $26.1 million, or 29.6 cents, a year earlier.

Furthermore, the manufacturing sector looks set to face a grim outlook, after data showed new orders have taken a steep dive in July, dropping almost 10 index points from June to 47.6.

The BNZ-Business NZ Performance of Manufacturing Index provides an early indicator of activity levels, with a reading above 50 indicating expansion, below 50 a contraction.

Nuplex (NZX: NPX ) fell 2% to $2.94, Fisher & Paykel Appliances (NZX: FPA ) fell 1.96% to 50 cents, while shares Cavalier (NZX: CAV ) were unchanged at $2.59. Crystal oscillator manufacturer, Rakon (NZX: RAK ), fell 1.9% to 1.6.

Turners & Growers (NZX: TUR ) fell 3.5% to $1.40 after it reported a 10% increase in underlying earnings to $11.8 million for the first-half of its financial year, short of analysts’ expectations.

Shares in Kiwi Income Property Trust (NZX: KIP ), were unchanged at 94 cents after the trust told investors at its annual meeting that it is well positioned to capitalise on New Zealand’s recovery - when it happens.

It said it sees early signs of this turnaround already, with property values stemming their losses to 0.5% in the last six months versus 14% over the last two years, and expects the consumer space to lead the charge as unemployment falls.

Michael Hill (NZX: MHI ) rose 1.5% to 67 cents, leading gains on the day. ING Property Trust (NZX: ING ) rose 0.8% to $1.24, and Contact Energy (NZX: CEN ) rose 0.2% to %5.70.

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