Stock Takes: Shake doesn't reach markets

Amid the rubble, the New Zealand sharemarket has fared OK. Photo / Greg Bowker

The Christchurch earthquake failed to create any serious tremors on the New Zealand sharemarket.

There was a brief knee-jerk reaction on Monday when Fletcher Building shares soared in anticipation of the construction work it will pick up and Tower fell in anticipation of insurance pay-outs.

But by the end of the day Tower had regained its losses after a briefing which predicted the cost would be limited to $5 million.

Craigs Investment Partners head of research Mark Lister says the earthquake didn't have a huge impact. "For such an event the reaction was a bit muted."

But another industry source reckons the earthquake was actually good for the market as it brought attention to New Zealand, encouraging foreign investors to pile in.

Some foreign investment funds are even thought to target countries where disasters occur.

The benchmark NZX-50 market shot up 1 per cent on Wednesday and the dollar also rose this week.

It has been a good run for the NZX-50 since the beginning of the month. The index has regained a lot of ground and is now back to where it was in mid-May.

Merger and acquisition has picked up globally, boosting investor confidence, although the same activity has yet to rise in New Zealand.









TELECOM TANKS

Telecom investors were not impressed by yesterday's shortlist for the first stage of the Government's ultra-fast broadband.

While Telecom still made the final 14 its plan for services across the country appears to have been rejected. Shares in the second-largest listed stock fell 13c yesterday to hit $2 before bouncing back a bit in the afternoon.

Vector, which is targeting just the Auckland region, has taken it as a positive sign while Telecom has played down the snub, saying the areas covered by the initial three preferential bidders represent just 12 per cent of the population.

It has also noted it is still keen to team up with other bidders, including the three parties given priority for stage one.

But Stock Takes hears that while Telecom talks about working with others it can be a tough partner, preferring to take the reins rather than letting others lead.

It will be interesting to see if this setback is a sign of things to come. The cards will all be laid out in the next month.

Telecom shares closed down 11c at $2.02 yesterday.

SYSTEMS ARE GO

The NZX's long-delayed clearing house finally got going on Monday and seems to have begun without a hitch.

The system, which was due to go live in July, finally got its regulatory approvals through from the Securities Commission and the Reserve Bank last week.

The clearing house means that all payments for NZX trading will go through one central place rather than between brokers directly.

One broker said the switch had been seamless although it was a fundamental shift going from knowing who the other party was to just dealing with the NZX clearing house.

Even though the change will bring New Zealand into line with best practices in other developed countries some have questioned whether it has added any value. "From our point of view it wasn't broken," one broker said of the old system.

It has been a huge cost for the industry involving long hours and system changes. No one has been willing to put a figure on it but it has resulted in a number of smaller firms pulling out of dealing directly through the exchange.

Even JBWere, which used to be a force in the broking industry with a number of wealthy clients, is no longer dealing direct.

TWO'S A CROWD?

The NZX's new clearing system means there are now two on the go with the Reserve Bank-backed Austraclear also remaining in force. One broker said having two systems would be confusing to people who wanted to invest here.

He expected most brokers to stick with Austraclear because of its link to the Reserve Bank and said he believed it would be much easier if there was just one system to work through.

The average retail punter isn't expected to notice a big change although they may now have to wait a bit longer to get their money out of the market.

Previous retail broking settlements could be pushed through faster sometimes whereas under the new system every deal will have a minimum settlement period of three days.

MMG NO MORE

The last remnants of the former Money Managers business are to be disbanded by October with the name set to disappear within six months.

Fund manager NZ Funds has acquired the remainder of the business and decided to end the franchise arrangement it set up just a year ago under the MMG Advisory Partners name.

NZ Funds took a 40 per cent stake in MMG in June 2008 and bought in consultants to restructure the business and change its image.

Founder Doug Somers-Edgar, who set up the company in 1985, retained a beneficial interest but stepped away from the everyday running of the firm.

High flying executive Derek Young was bought in and was determined to distance the company from its past financial products including First Step Trusts, Orange Finance and Totara Mortgage Fund. MMG stood up for its DNZ property investors to fight over plans to list and pay out a fee to the former managers.

But it seems the will to go on in the present format has ended. From October 1 most of the franchises will be operating on an individual business.

NZ Funds chief executive Richard James says its clients had expressed a clear preference to deal with locally owned and operated advisory firms.

"We have therefore acquired the MMG business and entered into agreements with each of the advice business owners to provide them with the services they will require in the impending environment."

HELLABY STEPS UP

Automotive, packaging and Number 1 Shoes owner Hellaby is preparing to advance its growth plans with a $28.4 million rights issue.

Trading in the three-for-seven rights issue began on Monday. Chief executive John Williamson is expecting take-up of the rights to be fairly strong.

Hellaby's largest shareholder Castle Investments, which owns 30 per cent, has already committed to taking up its share of the rights and the remainder has been underwritten by Forsyth Barr.

Williamson says the new money will be used to help the company adopt a more conservative capital structure and to increase its financial flexibility to allow room to grow both organically and through bolt-on acquisitions.

It is looking to buy businesses in the automotive industrial or distribution space but was not in any particular hurry, he said. "There's plenty of time."

Hellaby has been on a rollercoaster ride. Its share price peaked above $7 in 2007 only to fall back down to under 50c in early 2009.

Under new management the business has slowly turned around and has traded over $2 this year. Yesterday its shares closed down 2c at $1.77.