New Zealand shares fell for a third day led lower by Telecom Corp after an analyst's report this week downgraded the stock to a 'sell'. Units in the Fonterra Shareholders' Fund rose after Fonterra Cooperative Group yesterday slashed its forecast milk payout and boosted dividends.
The NZX 50 Index fell 7.004 points, or 0.1 percent, to 5158.552. Within the index, 15 stocks fell, 28 rose and seven were unchanged. Turnover was $171.6 million.
Telecom led the benchmark index lower, dropping 2.6 percent to $2.775, and extending its decline from a six-year high on Friday. A UBS analyst report this week downgraded the stock to a 'sell' rating from 'neutral' after this year's 24 percent advance and questions future profit growth ahead of the telecommunication providers shift away from its traditional services to focus on data, mobility and cloud services.
"What we've seen in the Telecom performance as of late is that it outperformed the rest of the market, while most other stocks have had a pull back from their highs earlier in the year," said Paul Harrison, who helps manage more than $700 million of equities for Salt Funds Management. "The negative call from UBS has accelerated the fall a little bit."
Units in Fonterra Shareholder's Fund extended yesterday's gain, advancing 2.1 percent to $6.20. Fonterra cut its forecast 2015 milk price to $6 a kilogram of milk solids from $7/kgMS, citing a decline in global dairy prices in the face of strong worldwide production, a build-up of inventory in China and falling demand in emerging markets. At the same time the company forecast a dividend of 20 cents to 25 cents a share, up from the 10 cents it plans to pay this year. The fund's units give holders access to Fonterra's dividend stream.