KEY POINTS:
The New Zealand sharemarket's New Year slide continued unchecked yesterday as the benchmark index fell 1.24 per cent. This takes year-to-date losses to more than 5 per cent and means $3.3 billion has now been lopped off the overall market's value.
Once again it was US sub-prime woes and recession fears on Wall St that drove the New Zealand market lower and, unlike its Australian counterpart, the NZX was unable to manage a bounce later in the session.
It ended the day 47.97 points lower at 3824.21, its weakest close since November 2006.
The latest bad news from Wall St came in the form of a warning from American Express that it was seeing signs of a weaker US economy with higher credit card delinquencies forcing the firm to set aside US$440 million ($558.8 million) for writeoffs.
That overshadowed earlier news that Bank of America was to buy ailing Countrywide Financial in a US$4 billion stock swap that could bolster the nation's largest mortgage lender against a severe housing slump.
Also weighing on stocks were reports that Citigroup and Merrill Lynch were poised to announce steeper writeoffs from mortgage losses than previously feared.
The Dow Jones Industrial Average closed 1.9 per cent lower, the tech-dominated Nasdaq composite fell 1.95 per cent and the S&P 500 1.33 per cent.
"People are just nervous about the US market and also what's now happening in the UK," said UBS managing director Campbell Stuart.
"You've got some of these bank results due out tomorrow and people are just looking at what the next level of writedowns is going to be. There's lots of rumours."
ASB Securities' Stephen Wright said the market retreat was indiscriminate, hitting good and not so good stocks alike.
"It's affected just about everything. I guess there's just too much negative sentiment around. There's lots of things to worry people."
Stuart said there continued to be limited participation by investors on the local market at present and Wright agreed. Total turnover yesterday was a fairly modest $88 million.
"The retail buyer is certainly very quiet at the moment. Some of that is down to the holiday season ... they don't tend to sell any more in these sorts of times but they still worry and they certainly don't buy until the coast is really clear."
While Stuart expected a "difficult first six months" for sharemarket investors with prices heading lower, "it's going to get to a stage soon where it's interesting value - markets don't straight-line forever".
But Wright said there were few signs that bargain hunters were emerging so far. "No one likes to try and catch a falling knife." Additional reporting:
SKYCITY DIVES TO 4 1/2-YEAR LOW
Amid the market selloff, SkyCity has fallen to its lowest price since May 22, 2003.
Its shares yesterday closed down 11 cents at $4.09. The stock fell as low as $4.05 during the day.
But investors say it is due more to a wary market returning from holiday as overseas markets struggle rather than any new problems at the casino company.
SkyCity's share price has shown no improvement since the December 18 announcement that it had appointed a new CEO experienced in casino management - Nigel Morrison - who takes over in March.
Last week Simon Botherway of Brook Asset Management said SkyCity's inability to sell its cinema division at the end of last year illustrated the problems of its business plan.
Yesterday's 2.4 per cent slide compares with the 1.24 per cent fall for the NZX-50.
It also marks an 11 per cent fall since SkyCity closed at $4.60 on New Year's Eve.
Stock in the company has been dropping since private equity company's TMP Newbridge and Apollo Management LG stopped short of an offer for Sky City, citing difficulty raising cash in the present credit crisis.
Subject to a buyer resolving those issues the latest slides could make a private equity offer more viable.
Tyndall Investment Management joint equities manager Rickey Ward said interest was still live and the falls were on small volumes around the Christmas-New Year period.
"There are always these liquidity issues for the New Zealand market at this time of year and you would expect them to start to pick up about now. But you have had some big equity movements overseas and everybody is waiting to see what happens.
"In these situations investors become indiscriminate and there are very low volumes. It's apparent there is one big seller out there," he said.
He guessed the losses would be due to overseas investors buying for a premium during sales talk.
"Sales had not happened and so the arbitrage investors might be selling to cut their losses now," Ward suggested. John Drinnan
- agencies, John Drinnan
