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MARKET CLOSE: Retailers lead the market lower

Tuesday 5th October 2010

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New Zealand stocks fell for the first time in three sessions, led by retailers including Kathmandu Holdings after the NZIER’s business opinion survey highlighted the risks of a double-dip recession.

The NZX 50 Index fell 10.6 points, or 0.3%, to 3,218.3. Within the index, 23 stocks fell, 11 rose and 16 were unchanged. Turnover was $64.1 million.

Investor sentiment was dented by a NZIER Quarterly Survey of Business Opinion, which showed a much weaker September quarter than expected, and a slump in activity and profit expectations through to the end of the year.

Kathmandu (NZX: KMD ) fell 2.6% to $1.88. Pumpkin Patch (NZX: PPL ) fell 2.6% to $1.88 after the company went ex-dividend today, and jeweller Michael Hill (NZX: MHI ) fell 1.5% to 66 cents.

“The general observation out there in the market is that retailers - and the retailing sector itself - are finding headwinds a bit strong at the moment,” BT Funds Management's Paul Richardson said. “They’re having a difficult time convincing consumers to part with their cash.”

The benchmark index pared its decline after the Reserve Bank of Australia unexpectedly held its cash-rate target unchanged at 4.5% for a fifth month, sending the Australian dollar tumbling. Australia is New Zealand’s biggest export market.

“The market is pretty finely balanced right now, and rates could go either way before the end of the year on the basis of inflationary pressure,” Richardson said. “We’re just watching for the Australian inflation numbers out later this month to see which way it will go.”

NZ Farming Systems (NZX: NZS ) fell 3% to 65 cents; PGG Wrightson (NZX: PGW ) fell 1.8% to 56 cents, and Fletcher Building (NZX: FBU ) fell 1.3% to $8.07.

NZX (NZX: NZX ) fell 1.3% to $1.56 after the number of trades on its exchanges in September fell 13% to 49,394, compared to the same month last year. Trading across all the company's indices was subdued over the month, with volumes on the NZX Main Board down 13%, NZX Debt Market volume down 8%, and NZX Alternative Market down 47%.

Tower (NZX: TWR ) fell 1.6% to 66 cents after the biggest shareholders in takeover target Fidelity Life indicated they plan to reject the unsolicited $118 million cash and scrip takeover offer.

Vital Health Property Trust (NZX: VHL ) the investor in specialist medical clinics formerly known as ING Medical, rose 1.6% to $1.30, leading gains on the NZX 50. The company is conducting due diligence ahead of a possible acquisition of Australia's Essential Healthcare Trust.

Vital will need to raise between $100 million and $170 million, assuming it is able to acquire the assets at book value and allowing for the A$30 million development pipeline over the next two years, according to First NZ Capital analyst Jason Lindsay, quoted on the ShareChat website.

Ebos (NZX: EBO ) rose 1.5% to $7, Guinness Peat Group (NZX: GPG ) rose 1.5% to 70 cents, and casino and hotel operator Sky City (NZX: SKC ) rose 1% to $2.95.

Auckland Airport (NZX: AIA ) rose 0.5% to $2.08 a day before the company makes its dividend payment.

OceanaGold (NZX: OGC ) was unchanged at $5.02 after the gold miner announced that it has entered into an agreement to sell special warrants and common shares in the company on a bought deal basis to a group of underwriters led by Macquarie Capital Markets Canada and Citigroup Global Markets Canada. The deal is expected to raise C$115.5 million at a price of C$3.50 per security.

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