NZ Stocks: Sharemarket dips on back of Wall St fall

Telecom led the local sharemarket lower this morning, following on from another tumultuous night in offshore markets on Friday.

"Given the fall in the Wall St market over the weekend, our market was always going to be on the back foot," JB Were senior investment adviser Peter Stokes said.

The benchmark NZSE-40 index shed 20.95 points, or just over 1 percent, to 2026.07 by mid morning.

Telecom made up the lion's share of early turnover, contributing $20 million of the $37.4 million traded.

The stock was down 14c at 514 - its lowest point since February 2001.

Mr Stokes said Telecom - New Zealand's largest listed company by market capitalisation - tended to act as a barometer for offshore sentiment.

"As our leading stock - and particularly being in the telecommunications sector at the moment - I think it is a little bit hard (for Telecom) to divorce itself from international trends.

"Telecom is a barometer of our market in many ways. Often if there are weaker offshore trends it will filter through to the bigger stocks first," he said.

In the US on Friday, stocks ended sharply lower as a wave of corporate profit warnings swamped Wall St, exacerbating fears the long-awaited earnings rebound is not yet in sight.

The Nasdaq composite index fell for a fourth straight session, dropping 75.95 points, or 3.65 per cent, to 2004.16, while the blue-chip Dow Jones industrial average tumbled 227.18 points, or 2.17 per cent, to 10252.68.

Outside of Telecom, the wider market bucked the downward trend.

Contact Energy hit an 18-month high of 317 in early trade after gaining another 3c, but eased to be up 1c at 315 by mid morning.

Contact is seen to be in a good position to benefit from higher wholesale electricity prices, with 70 percent of its generation exposure hedged, leaving it to profit from the unhedged 30 percent. Wholesale prices have risen to four to five times previously prevailing levels in recent weeks.

Also working in Contact's favour is the fact that it is a tightly-held stock, with Edison owning just over half and the market short of the stock, having sold into Edison's bid for more shares in May.

Fletcher Building held onto Friday's 6c gain to trade unchanged at 253 by mid morning.

A new CEO and predictions the construction sector in Australasia had reached rock bottom - with better times now in sight - has investors viewing the stock as undervalued.

Guiness Peat Group (GPG) rebounded 2c to 169 after being sold off in the wake of the Enza foreign exchange fiasco on Friday.

"I think people are taking the view that that stock might have been oversold last week in the Enza fallout," Mr Stokes said.

The industry has been in turmoil since Enza's announcement in May that it intended to make this season's suppliers pay for the company's $50 million in old foreign-exchange losses and $4.5 million Port Napier loading systems debt.

Enza, the nation's apple exporter, had said the debt was a grower issue and the company's corporate controllers, GPG and FR Partners, which bought 36 percent of it in a raid last year, were to be exempt.

Analysts have since said that even if GPG was forced to fork out the whole $50 million and write off its Enza investment, the impact on its net asset backing would only be around 1c a share -- nothing like the 11c investors wiped off its value on Friday.

In other movements, Montana was up 1c at 453 after the Takeovers Panel on Friday barred for a further 21 days bidder Allied Domecq from acting on its "irrevocable promise" to stand in the market for the remaining shares in the winemaker for $4.80 per share.

The "promise", made ahead of new takeover rules introduced on July 1, was described by the panel as an intentional move to avoid complying with the new code, which aims to ensure the same offer is made to all shareholders.

Allied has since tabled another offer which complies with the new regulations.

Infratil added a further 3c to 159, TrustPower was up 5c at 325, The Warehouse was up 3c at 538 and Waste Management added 1c to 342.

On the downside, Auckland Airport shed 2c to 348, Fisher & Paykel ceded 10c to 1215 after its recent run up, Sky City was down 5c at 1098, and its namesake Sky TV shed 3c to 330.

Australian telco Telstra Saturn continued to battle against problems at its joint-venture company Hong Kong's Pacific Century CyberWorks Ltd, losing 28c to 620 by mid morning.

In all, falls outnumbered rises by 48 to 23 among the 124 stocks traded.

- NZPA