NZ stocks: Shares fall as Telecom investigated

12.00 pm

The New Zealand sharemarket was knocked this morning as the Securities Commission said it was reviewing Telecom's accounting practices.

The benchmark NZSE-40 index was down 7.03 points, or 0.34 per cent, at 2064.91 by 11am. Turnover was light at $21 million.

Securities Commission chairwoman Jane Diplock said the watchdog was just beginning its probe and had not had Telecom on its radar for any length of time.

"It's the analysts who have been raising these issues and the analysts have had some criticism about the accounting practices," she said.

It was not to do with off balance sheet items -- which is what pulled down US energy giant Enron -- it was to do with the recognition of upfront revenues, the sale and leasebacks of surplus capacity on Telecom's cables, she said.

Telecom, which with a market weighting of 22 per cent acts as a bellwether for the overall index, plunged 14c to $5.18 following the announcement. At 11am it had recovered slightly to $5.20 on turnover worth $4 million.

The stock was already under pressure after credit ratings agency Moody's yesterday said it had put Telecom on review.

Moody's said the review was driven by "continued poor returns" from Telecom's Australian businesses.

Telecom yesterday reported a better-than-expected December quarter net profit of $161 million. The half year net profit rose to $312 million from $300 million.

Elsewhere in the market Fletcher Forests attracted strong buying interest, fuelling rumours the forest products company is set to be named as the successful bidder for the Central North Island Forestry Partnership (CNI).

Just over two million preference shares and 1.9 million head shares changed hands by mid morning, with brokerage Credit Suisse First Boston said to have snapped up many of those.

Forsyth Barr Frater Williams broker Alan Wills said CSFB had previously been sellers of the stock but had recently reversed that stance.

Both classes of share rose a cent to 26c in the morning session.

In other movements, the Fisher & Paykel stocks continued to trek northwards, with the Appliance stock up 20c at 940 and the Healthcare division up 19c at 1074.

Carter Holt Harvey was flat at 187, Sky City added 2c to 615, Sky TV was up 2c at 425 and Contact Energy added 5c to 383.

Ports of Auckland was up 5c at 565 after yesterday reporting it had lifted its profit for the six months to December 31 by 9 per cent to $22.7 million.

Bendon was up 6c at 193 after the Hugo Venter-led consortium said it was laying a higher bid on the table for the lingerie maker.

On the downside, The Warehouse slipped a cent to 641, Lion Nathan was down 4c at 591, Baycorp Advantage fell 10c to 610 and Waste Management dropped a cent to 304.

Falls outnumbered rises by 40 to 30 among the 117 stocks traded so far.

In the United States stocks spun sharply lower on Tuesday, dropping the Nasdaq composite index to near a 4-month low, as investors feared their portfolios may be next to suffer from shaky bookkeeping or bad debts.

The Dow Jones industrial average fell 159.21 points, or 1.61 per cent, to 9743.83, according to the latest data, while the Nasdaq composite tumbled 55.35 points, or 3.07 per cent, to 1749.85, a closing low unseen since early November. The benchmark Standard & Poor's 500 index dropped 20.97 points, or 1.9 per cent, to 1083.21.

- NZPA