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The NZX's titan Telecom plunged to a near 16-year low as turmoil on Wall St spread to the New Zealand sharemarket.
Telecom shares fell by as much as 14c - 4.8 per cent - to $2.79 in trading yesterday before recovering slightly to close 13c down at $2.80. Shareholders would have to look as far back as October 27, 1992 for a similar close.
First NZ Capital analyst Greg Main said while sentiment around Wall St was behind the plunge yesterday, underlying concern over Telecom's short-term prospects was the main factor in the broader collapse of the company's share price.
"There's still some perceived risks in the stock. People are probably just looking across their portfolios and when they're in doubt, they're taking risk off the table."
Telecom shares had their biggest one-day plunge in more than two years last month after it declared a 30 per cent fall in fourth quarter earnings, and forecast a second year of declining profit. It was also the fifth consecutive year that expenses have grown faster than revenues - two and a half times faster on average - squeezing the foundations of the group's profitability.
Doubt was also cast on the prospect of the company's historically high dividend payouts continuing in the medium term.
It slid on August 8 by as much as 38c - 10 per cent - to $3.30, and has been on a downward trajectory ever since.
ASB Securities adviser Stephen Wright said the scene was set the moment Telecom announced its full-year results last month.
"In general it's a stock that's well past the time when we used to put people into Telecom because it's a leading stock with the prospect of sustained and good dividend yield. Now it's just too difficult to forecast, what with competition, regulation and reorganisation.
"It's just completely lost its attractiveness, but then some days it will just get hit harder by overseas falls because your marginal seller's most likely to be an overseas institution.
Hamilton Hindin Greene director Grant Williamson agreed with Wright's sentiments.
"The company always had a large number of foreign investors and with the New Zealand dollar in decline, and foreign markets in decline, we have seen a fair degree of selling from those foreign investors ... I think that's probably one of the bigger reasons why the price is down where it is at the moment.
"The general state of the equity markets is not particularly healthy, and any company that maybe doesn't offer any type of growth in the short term has been sold down pretty aggressively."
The share price's downward movement has prompted speculation that it could be knocked off its perch as the NZX's top stock by Contact Energy.
Telecom was worth $5.112 billion at the end of yesterday, closely followed by Contact at $5.017 billion. But Contact could not be fully represented in the New Zealand index because it is half-owned by Origin Energy.
Williamson said Telecom continued to have an influence on managed funds weighted towards top 10 stocks. Telecom is a real drag on the NZX index at this stage."
