NZ stocks: Telecom drags stocks down 1.6 per cent

The New Zealand sharemarket is echoing the feeling of the rest of the country's economy, but the situation is not all doom and gloom, a sharebroker said yesterday.

"Markets can be volatile so we should not get too despondent at the moment," Credit Suisse First Boston dealer David Price said. "Things tend to turn around relatively quickly."

The NZSE-40 Capital Index was 33.95 points (1.62 per cent) lower at 2057.77. The dollar bounded back from a fresh record low, almost 1.5USc up on Thursday's new all-time low of 42.35USc.

Most of the sharemarket's fall was due to market giant Telecom, which makes up one-quarter of the market by value. The top stock plummeted 30c to a 3 1/2-year low of 642, on heavy turnover of 14.4 million shares.

"Unfortunately for Telecom we've got a situation where Telecom is the proxy for New Zealand," Mr Price said. "If someone is raising cash for any reason out of New Zealand, the first thing to go is Telecom, and vice versa - if they are putting money in, they put it into Telecom."

Telecom's fall was in line with a worldwide drop in telcos and it wasn't doing as badly as those in some countries, Mr Price said. British Telecom shares, for example, were selling at £8, from £15.60 in December.

The halving of Telecom's dividend had not helped either, Mr Price said.

Telstra fell 56c to 880. This was partly because of the international swing against telcos, but mainly because Telstra and Pacific Century Cyberworks said they planned a 50-50 joint venture to create a global internet protocol backbone business, backed by debt of up to $US1.75 billion.

The Warehouse fell as low as 550 yesterday - a 33c drop on Thursday's closing price - but recovered to 570 by the close after saying it had six months of forward foreign exchange cover.

On the positive side of the ledger, Fletcher Energy continued to strengthen on speculation that it was about to sold off, gaining 7c to 802. However, Fletcher Forests was 3c weaker at 88 and Building unchanged at 225.

Baycorp bounced back from its 35c drop on Thursday to close 50c higher at 1305, Sky TV gained 8c to 378 and Fisher and Paykel closed 5c stronger at 745.

Not faring as well, Axa Asia fell 14c to 346, INL came off 11c to 377 while Lion Nathan and Frucor both softened 10c to 470 and 219, respectively. Tower was 9c down at 525, Contact fell 6c to 253 and Carter Holt Harvey was 2c weaker at 178.

- NZPA