NZ stocks: Tower plummets, Tranz Rail recovers

12.00pm

The New Zealand sharemarket was headed southwards this morning, easing back from a portfolio buy-up on Friday and a dramatic falloff in Tower's share price.

Just after 11am the NZSE-40 Capital Index was down 10.52 points, or 0.52 per cent, to 2029.18 on a low turnover of $23.6 million.

Brokers noted that Friday's trading was pushed up by a MSCI buy-up -- portfolio buying based on Morgan Stanley Capital Index.

Shares in financial services firm Tower plunged $1.40 to 215 after they resumed trading from a two-day halt. The shares touched a new low of $2.10, a 40 per cent decline, as investors reacted to Tower's warning on Friday that it would post a steep annual loss and fail to deliver a dividend.

Tower said it was expecting a loss of $30 to $40 million for the year to September -- excluding any writedowns on Tower Australia -- compared with last year's profit of $77.2 million.

The response was "very disappointing," but a near-halving of Tower's trading price was possibly "an over-reaction" when one looked at the underlying book value and cash flows of the business, said ABN Amro broker Nigel Scott.

"Financial services and insurance companies globally have all taken a hit," he noted, adding that "here's a company once again that has shown significant losses on their Australian operations."

Another standout this morning was a 4c recovery in Tranz Rail shares after the stock plummeted to a year low of $1.23 last week.

This morning Tranz Rail was up to 146, albeit on light turnover, as investors reassessed plans to restore Tranz Rail's finances, including a $60 million rights issue.

Telecom was the market leader in terms of turnover, with 1.3 million shares worth $7 million changing hands. The share price was up 3c to 517.

BIL International, formerly known as Brierley, was up 2c to 62 after a London paper speculated that investment company Orb Estates was preparing to snap up BIL's 46 per cent stake in British hotel chain Thistle.

Orb, based in the island tax haven of Jersey off the south coast of England, bought 37 of Thistle's 58 hotels earlier this year in a sale and leaseback deal.

This week investors will also have their eyes on four big results, from brewers Lion Nathan and DB, and the two Fisher & Paykel companies.

The F&P twins have been trading strongly in anticipation of good interim results. This morning F&P Healthcare was down 7c to 1112 and its appliance cousin was steady at 10.95.

Discount retailer the Warehouse was down 8c to 741, Sky City eased 5c to 760 and Wellington department store Kirkcaldies recovered 5c after announcing on Friday a 20 per cent drop in annual profit to $1.62 million.

Some of the more active stocks included Contact Energy, down 3c to 387; Auckland Airport up a cent to 540; Carter Holt, also up a cent to 171; and Fletcher Building, down a cent to 305.

So far there have been 29 rises and 25 falls on 96 stocks traded.

Over the weekend on Wall St, stocks capped their fourth straight week of gains as the release of weak jobs and manufacturing data raised hopes the US Federal Reserve would cut interest rates this week to spur a sluggish economy.

The Dow Jones industrial average closed up 120.61 points, or 1.44 per cent, at 8517.64. On Thursday, the Dow average ended October with its best monthly performance since 1987.

The broader Standard & Poor's 500 Index was up 15.2 points, or 1.72 per cent, at 900.96. The technology-laced Nasdaq Composite Index was up 30.95 points, or 2.33 per cent, at 1360.70.

For the week, the Dow gained 0.9 per cent, the S&P 500 advanced 0.4 per cent and the Nasdaq climbed 2.2 per cent.

- NZPA