NZ stocks: Air NZ shares hold market in suspense

12.15 pm

The sharemarket was holding its breath this morning as trading in Air New Zealand shares were suspended pending an announcement.

Brokers said the move came following comments from Prime Minister Helen Clark yesterday advising investors to hold on to their shares.

"I'd recommend they hang on to them, because I am absolutely convinced that Air NZ has a viable future," she said.

There were also reports that her office has tested market reaction to the Government's increasing its commitment to the multimillion-dollar bailout of Air NZ.

Trading was slow on the market this morning, with a modest turnover of 9.1 million shares worth $30 million.

The NZSE-40 capital index was down 0.26 points to 1822.19 as a positive start gave way to mixed fortunes on the overall bourse.

Market leader Telecom took a tumble, falling 5c to 456, while Australian rival Telstra fell 10c to 621.

Lion Nathan, which is viewed as a "defensive" stock in troubled times, was up 3c to 573 .

Other moves included Auckland Airport up 4c to 318, Air NZ stakeholder Brierley up 4c to 29, Baycorp steady at 1025, Sky City up 4c to 1049, and the Warehouse down 5c to 585.

There have been 29 rises and 23 falls on 106 stocks traded so far.

Brokers said the big news this morning was obviously the latest development in the fate of the national carrier.

Air NZ shares yesterday bounced back from speculation that the airline was heading for statutory management, with its A shares closing up 50 per cent higher to 27 cents. Unrestricted B shares rose 61 percent higher to 25c.

Broker Richard Burton of Forsyth Barr Frater Williams said the market was obviously starting to take the view that Air NZ would survive.

But that was cold comfort for many shareholders who in the past four weeks have seen Air New Zealand lose 90 per cent of its value.

Today's action followed reports that the Government could buy out either of the two main shareholders, Singapore Airlines or Brierley Investments.

One source said the Prime Minister's office had been making inquiries as to how the market would react to one of two actions by the Government -- putting capital into the airline or underwriting a rights issue.

Miss Clark's office has refused to comment so far, but MacQuarie equities analyst Arthur Lim said last night that he believed a rights issue would be better received by the market, because it gave existing shareholders the option of maintaining their relative stakes in Air NZ.

A capital injection at the current low share prices would severely dilute their holdings.

Apart from Air NZ, the New Zealand sharemarket is looking largely to overseas for direction.

Overnight, Wall Street enjoyed a second day of improved trading, breaking a losing streak of more than a month, aided by upbeat forecasts from blue-chip firms like Boeing.

The session was muted, however, by persistent recession fears and a consumer confidence survey which showed its biggest one-day drop since October 1990 and its lowest level since January 1996.

The Dow rose 56.11 points, or 0.65 per cent, to 8,659.97, after logging its fifth-largest point gain ever on Monday in the wake of last week's wrenching sell-off.

The broad Standard & Poor's 500 Index gained 8.82 points, or 0.88 per cent, to 1,012.27, adding to Monday's 3.8 per cent bounce.

The Nasdaq Composite Index was up 2.24 points, or 0.15 per cent, to 1,501.64, after jumping more than 5.3 per cent on Monday from a week-long skid.

- NZPA