NZ sharemarket plunges 2.5% in first minutes after China dive

By NZPA

Wednesday 28th February 2007

The New Zealand sharemarket plunged 2.5% in the first few minutes of trading today after the China's benchmarket share index sent world markets into a spin yesterday with a 9% dive.

The benchmark NZSX-50 index fell 103 points to 3996.37 after three minutes of trading this morning.

US stocks tumbled on Wall Street, sending the benchmark S&P 500 index to its biggest one-day slide in more than 3-1/2 years as a sell-off in China's equity market fanned worries that stock valuations there are too high and some data indicated US economic growth may slow.

With an hour left to trade, the Dow Jones industrial average fell more than 500 points. But within minutes, the Dow cut some of that loss by more than 100 points. Traders said the late-hour slide may have been precipitated by programme trades heading toward the close.

China's Shanghai Composite Index dropped almost 9% on fears that the government would crack down on speculation that has driven stock prices there to record highs.

A government report that showed a much bigger-than-expected drop of 7.8% in January's new orders for US-made durable goods added to growth concerns. Durable goods are big-ticket items, including home appliances and computers, intended to last three years or more.

The blood was across the market. Among the top 50 index it was sea of red arrows -- there was not a green arrow on the screen.
Ten minutes after opening, the market was down 2.9%.

Market leader Telecom was down 15c to $4.74, No 2 stock Contact Energy down 43c to $8.66 and No 3 stock Fletcher Building down 30c to $10.50 at 10.06am.

Sky City which reported a 23% fall in its half year profit fell 18c to $4.90.

The shares fell as the New Zealand dollar dropped more than one US cent and three Japanese yen amid global nervousness in financial markets.

Air NZ, which yesterday reported a strong half year profit sending its shares to a three year high, lost 8c to $2.15.

Port of Tauranga was down 41c to $5.80, high flying Ryman Healthcare fell 14c to $2.16, Rakon lost 22c to $4.28 and Scott Technology lost 12c to $2.00.

"It's in line with what you'd expect," said a Wellington broker, who did not wish to be identified. She said business had been hectic.

Hamilton Hindin Greene broker Grant Williamson did not believe the market was in a crisis. However, he called today's action " a pretty decent correction".

"It's not a crisis. It's mainly retail investors," he said.

He said selling had been led by retailers and institutions were sitting on the sidelines. Volumes had been light.

There had been an element of panic selling among retail investors but more experienced investors were sitting it out. Williamson expected bargain hunters to come into the market.

Sky City had been hit hard.

"They couldn't have picked a worse day to come out with a disappointing result," he said.

Contact Energy had also been badly affected after its very strong run despite a slightly disappointing result last week.

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