NZ stocks: Double weakness sends index down

The sharemarket was down yesterday, buffeted by weakness in Telecom and Auckland Airport.

The NZSE-40 index ended down 10.72 points at 2051.34 on turnover worth $55 million, $14 million of it in Telecom.

JB Were's Peter Stokes said yesterday's Reserve Bank decision to hold interest rates steady at 5.75 percent was widely expected and had caused few waves in the market.



"It was by and large where we were looking - for no change," Mr Stokes said.

"The market seemed to take the announcement in its stride."

Reserve Bank governor Don Brash shrugged off calls from Business New Zealand and the Council of Trade Unions to prime the sluggish domestic economy with another rate cut.

He said many inflation indicators were still measuring above the bank's 0-3 per cent inflation target over the next year or so.

Among the market leaders today, Telecom closed down 7c at 545, despite the impending introduction of its CDMA mobile network.

Mr Stokes said rumours were circulating that Telecom rival Clear Communications had been sold.

"There is some talk about Clear having been sold to a local consortium which may be Jump Capital which is a Fay Richwhite vehicle," he said.

"If Clear has been sold then you would expect it to be recapitalised and its strategies refocused, probably more towards the business market.

"If this is true then Clear is likely to emerge as a stronger competitor."

Credit Suisse First Boston dealer David Price said the market had been speculating about a potential Clear takeover for quite a while.

"It is a rumour and it is circulating, but there is also a rumour that Telstra-Saturn is involved as well. We can neither confirm or deny that rumour."

Clear representatives were unavailable for comment.

Auckland Airport closed down 2c at 354 after competition regulator the Commerce Commission recommended some price controls be introduced on its airport activities.

Mr Stokes said some of the initial shock at Tuesday's announcement appeared to have subsided.

"Initially there was nervousness as to what the Commerce Commission's signal yesterday really meant for the company," he said.

"But the announcement was really just that - a signal - and there is a bit of further work to do from here as to whether those decisions are going to be implemented."

Lion shares closed unchanged at 550, and takeover target Montana was down 45c at 435 on very light turnover.

On Monday, the Australasian brewer used a peculiarity in the new takeovers code to offer Montana shareholders a two-tiered bid for the remainder of the company - an initial offer of $5.50 for 11 per cent of Montana, which returns Lion to 51 percent, followed by a second offer for remaining shares at $3.70 each.

That second offer is significantly lower than the stock has been trading.

Rival bidder Allied Domecq is offering $4.80 a share.

Lion meanwhile has agreed that selling its stake in Montana to Allied is an option if the price is right.



The broader market was slightly up yesterday, rises outnumbering falls by 55 to 47 among the 145 stocks traded.

Fletcher Building rose 4c to 246, boosted by strong new building permit figures in Australia yesterday.

Sky City ended up 10c at 1100 after it was granted interim approval to increase its gaming space and build a conference facility at its Auckland casino.

Tranz Rail was up 10c at 400, Fisher & Paykel added 5c to 1185, Carter Holt Harvey was up 3c at 175 and WestpacTrust up 10c at 1610.

Wall Street was closed overnight for America's Independence Day holiday which should mean a quiet start to local trade today, Mr Stokes said.

- NZPA