NZ stocks: Market firms as Warehouse bounces

12.00pm

The sharemarket firmed this morning thanks mainly to heavyweight Telecom, while the two stocks of the moment, AMP and The Warehouse, tugged in opposite directions.

AMP plunged more than 36 per cent after it resumed trading following its two day suspension surrounding its restructuring announcement.

Its stock resumed at $7.95 against the pre-suspension price of $9.80, but quickly descended to $6.25 by 11.30am, down $3.55 from Thursday.

AMP on Friday announced it had successfully raised A$1.2 billion ($1.4 billion) through an institutional share placement of 222 million shares at A$5.50 ($6.23) per share.

It announced the capital raising on Thursday to fund its plan to spin off its United Kingdom business from its Australian business.

ABN Amro Craigs' Matt Willis said trading had been tentative and would be until the Australian market opened.

He said that while the tender price on Friday was towards the bottom end of the indicative range announced by AMP on Thursday, there had obviously been good institutional demand.

"The price was always going to come under pressure today, it was just a matter of assessing the benefits of the demerger and capital raising against the obvious negatives of the asset writedowns and the dilution.

"Most valuations we are hearing bandied around are around the mid-to-lower A$6 levels but there is the dilution impact as well," he said.

Meanwhile, The Warehouse, which was mainly responsible for sending the market down 2 per cent on Friday, rebounded 24 cents, 5.3 per cent, to 430 from its 155c pummelling in reaction to its profit warning.

Most people assessed the stock as over-punished, but not everyone.

Mr Willis questioned what the rebound was on.

"I don't necessarily think the price move on Friday was an over-reaction. It moved in accordance with the earnings downgrade of 20 per cent, which is sort of what the share price did."

He said the company had been trading at 18 times earnings and now it was trading at 16 times revised earnings.

"The relative valuation hasn't changed a great deal. Given the volatility the price will be pushed around a bit.

"I'm quite surprised to see the degree of the bounce today."

There was heavy trading and it topped the turnover at $9 million. Total market turnover was $26 million.

The benchmark NZ50 gross index was up 4.37 points to 1959.82 while the top-40 index was up 5.91 at 1948.19 at 11.30am. Telecom was up 4c at 468 following a strong session on Wall Street on Friday. Turnover was worth $7.6 million.

US stocks finished sharply higher on Friday as investors shrugged off a weak employment report and pinned their hopes on an eventual economic recovery.

Air New Zealand rose 1c to 41c and traded up at 43c after airlines stocks in the US soared on Merrill Lynch's bullish investment call on the beleaguered industry.

Contact Energy, whose result on Thursday was not well received, rose 1c to 429.

Michael Hill recovered 3 to 425 after its rough treatment recently. Westpac NZ was up 23c to 1670, TrustPower was up 5c to 425 and Software of Excellence was up 13c to 145.

There were 37 rises and 26 falls among the 108 stocks traded.

- NZPA