Shares creep up, but nerves remain

By GEOFF SENESCALL

The New Zealand sharemarket remains on tenterhooks despite posting a modest gain yesterday after a rebound on Wall Street.

Fear that a further shakeout might be in store in the US pushed the local benchmark NZSE-40 index down during the day.

It lost more than half its opening gains, and closed up 21.23 points, or 1 per cent, at 1995.01.

During the day, the index peaked at 2032.04 in response to rebounding US markets - the Dow Jones Industrial Average ended up 2.69 per cent and the Nasdaq technology index up 6.56 per cent.

At yesterday's close, the New Zealand market was still around 77 points below where it was before Monday's meltdown, when around $2.4 billion of value was wiped off the market.

While New Zealand regained only about one quarter of the ground it lost on Monday, most Asian markets performed better yesterday.

They recovered about 40 per cent of the value they lost the previous day, but investors were still apprehensive.

One measure of the unease was the flight to big quality stocks. In Australia, for example, the market was up 2.2 per cent.

But only 131 stocks rose and 554 fell.

New Zealand buying was less discerning - 85 stocks rose and 26 fell.

Keith Hill, of broker DF Mainland, said the local selling during the day showed the local market was expecting further weakness in the US.

"Asian markets did not respond convincingly to the US rally, fuelling concern as the day wore on," he said.

"There is still a lot of nervousness. With the Easter break coming up, investors are happy just to sit on their hands."

Nigel Scott, of broker ABN AMRO, believed the local market acted rationally.

"The violent up and down movements of the last week or so have understandably knocked investor confidence," he said.

"People are happy to sit on the sidelines and wait for developments that normally come. Aftershocks usually take more than just a couple of days to happen."

The prospect of further interest rate rises in New Zealand and the US was also sapping enthusiasm, Mr Scott said.

The Governor of the Reserve Bank, Dr Don Brash, is expected to lift interest rates today by a quarter of a per cent.

Overall, yesterday was a reasonably quiet trading day on the local market, with private client investors again the most active.

Technology stocks such as Advantage Group, IT Capital and Strathmore, which got a pasting on Monday, were initially buoyed by the strong Nasdaq performance.

But the enthusiasm was short-lived as private clients chose to sell into any strength.

"Having taken some huge losses, private clients are extremely wary and concerned that there could be more downside yet," said Arthur Lim of broker Ord Minnett. "Consequently, they have taken the opportunity of this morning's bounce to sell down or out of the sector."

Tech stocks were not the only ones off their highs, he said.

Market mainstay Telecom was up 27c in early trading but at the close was up only 9c at 872c.

The second largest stock, Carter Holt Harvey, followed a similar pattern. It was up 7c in the morning but closed down 1c at 167c.

Mr Lim said the volatility would continue "until some clear trends emerge."