Sharemarket depressed

Press, 14 July 1980, Page 22

Sharemarket depressed

Bv

ADRIAN BROKKING.

commercial editor

The New Zealand sharemarket fell sharply last week: the N.Z.U. index dropped on each successive day, and closed on Friday at 427.0 — a fall of 7.66 points, or 1.76 per cent. The range and magnitude of the decline suggests more than just profit taking, and there can be little doubt that investors’ mood has changed markedly, and is much more pessimistic. No need to look far for the reasons: apart from the almost inevitable post-Bud-get depression the failure of the Mosgiel rescue attempt by Alliance has caused widespread uneasiness regarding the short term future. The forecast ■of high unemployment — contained in an interdepartmental report — which has become public knowledge during the week, did nothing to dispel an air of despondency.

However, the market -isi over-reacting to these,) events, just as its earlier eu-r phoric mood was an over-i reaction. There is nothing; new in the facts themselves.; ;only in our way of lookingi< at them. Coming back to Alliance!’ ; Textiles and Mosgiel Wool-.] Tens, the directors of Al-j. Jiance, in their statement;! during the week, were clear-;' ly disappointed at the Gov-b ernment decision. But thell brutal fact of the matter isd that, in this case at least, j there is no need to actually; take over a competitor toil benefit from his demise. i' You can simply let him gob bust, and then move into thel’ market vacuum. The Al-jl liance directors did not ac- ; . tually say that, but I will say it for them. Company news during thep ■week was on the whole': good.

Good profit results came, Trom James Aviation, 8.N.Z.! [Finance. Henderson and Pol-1 [ lard, and only the profit; 'news from Dominion Bre-‘ ;weries was less than ex-1 [citing. In contrast to Lion Breiweries, which increased its profit 21.7 per cent to !$12.7M. D.B. had a fall of [8.5 per cent to about half [the Lion profit — $6.5M. (After the announcement the I price of the shares fell about >sc on quotations. [ Closing quotations on thel | Christchurch Invercargill! (Stock Exchange on Friday; i were buy 75c. sell 85c. The 'closing quotations in Auckland were closer together:! i buyers were offering 78c) and sellers were asking 82c: : Sharebrokers expressed! disappointment with the lack I |of a 50th anniversary bonus: 'share issue. | Henderson an.d Pollard, did!

i,make a bonus issue, after . more titan doubling its pro-j •I fit in the latest financial) J year. The bonus shares are. •‘participating in the in-i •'creased final dividend of ll! per cent — making the effective dividend 16.375 perl cent, compared with 13.5 per) i cent last year. ! B.N.Z. Finance announced; ’ a 2:5- rights issue at 140 c ai . share, and increased the ; dividend from 14.5 to 16 per! cent. As the theoretical) value of the rights works;, •|out at 68c each, this issue) llprovides shareholders with ai (worthwhile bonus. ) j Which is more than can; • Ibe said for the rights issue) :)by Arthur Yates and Com- 1 :)pany, Ltd. At 300 c on a 1:4) I basis, the theoretical value' II of the rights is only 40c (or) :|loc a share) and the market) expressed, its disappointment) |by dropping the shares 23c! I! for the week, to 342 c.