NZ stocks: Telecom recovers from early flaying

The New Zealand sharemarket closed flat yesterday after Telecom recovered from early punishment and the central bank left interest rates alone.

The NZSE-40 capital index finished down 0.11 of a point to 2145.46.

However, smaller stocks rallied, the NZSE-SCI capital index gaining 35.97 points to 5493.46.

Total turnover was worth a high $182.42 million, Sky TV contributing $81.60 million, Telecom $51.57 million and Fletcher Challenge Energy $11.60 million.

Rising stocks outnumbered falls 59 to 39 among the 149 traded.

Credit Suisse First Boston's David Price said Telecom hit a low of 685 as people reacted to its result.

"Telecom was fairly severely treated early on. But Tuesday's result really shouldn't have been too much of a surprise to people," he said.

The cut in the dividend to 50 per cent of profits rather than an anticipated 70 per cent was the main surprise.

"Their reaction in the morning was quite aggressive."

He noted a lot of funds were still short in the stock.

Telecom ended down just 5c at 715.

"Anywhere around the 700 level you will start to find reasonable support for it again." Mr Price said it was nice to see the Reserve Bank leaving its official cash rate at 6.50 per cent, taking heed of weak economic data and poor confidence surveys.

If the bank had raised the cash rate that would have increased yields on interest products which compete with stocks.

Casino operator Sky City had a "boomer" day, closing up 25c at 770 after a "very, very strong result." Mr Price said both the result and dividend were ahead of expectation.

Sky City posted a record profit of $60.3 million for the June year, up 32 per cent on the previous period, and is to pay a fully imputed final dividend of 32c a share.

Sky Network Television shed 20c to 400 after placing 20 million shares at 399c to reportedly raise $80 million for investment in interactive TV.

Elsewhere among the leaders, Carter Holt firmed 1c to 187. Standard & Poor's raised the long-term and short-term credit ratings on the wood products company and shifted the outlook to stable from positive.

Auckland Airport lost 5c to 297, Contact Energy rose 5c to 265, and Tranz Rail - to pay a final dividend of 8.5c - put on 5c, to 395.

Fletcher Building dropped 5c to 217, Energy was up 8c to 785 and Forests gained 3c to 86.

Fisher and Paykel, which Mr Price said was still cheap, jumped 35c to 755.

Baycorp put on 30c to $12.80 and Renaissance, which on Tuesday talked of listing internet unit Conduit in Singapore, surged 8c to 83.

- NZPA