Strong gains on N.Z. market

Press, 7 March 1983, Page 26

Strong gains on N.Z. market

By

ADRIAN BROKKING,

Commercial editor

The New Zealand sharemarket continued its strong rally last week, in quite active trading. On Thursday the NZU index reached 728.17 — a little more than one point away from its highest-ever level set a year ago.

The election victory by the Australian Labour Party provides food for thought on the local sharemarket’s immediate prospects, as there will be some flow-on effects. There can be little doubt that the prospect of a devaluation has moved from a low to a high probability, as New Zealand may be expected to follow suit if Australia were to devalue — an event which is quite on the cards.

This suggests a flight from money into assets, and would be a bull point for the market. It also affects selectivity — company’s that export, or exploit assets, should be favoured against those companies which may be adversely affected by a rise in the price of imported goods and raw materials. There will also be a delay in the signing of the agreement with Australia on

closer economic relations (CER). I believe that the Government has had definite assurances from the Australian Labour leaders that the agreement will be signed.

Even so, there is room for misgivings over the attitude of the Australian Labour Party on this topic, and they may take a strong line to protect Australian employment. On balance it will probably work out all right.

Much of the excitement on the sharemarket last week was provided by local companies. Waitaki and Mair stimulated the bulls with optimistic profit projections, and the result from M. O’Brien strongly suggests that this company has indeed turned the comer.

By contrast, it is sad for the shareholders of Andrews and Beaven that in the middle of a bull market they should find themselves in the position they are in. A and B announced a 38 per cent lower- half-yearly profit on Wednesday, and simultaneously Repco Australia stood in the market for a majority interest at below-market price of the shares.

On the information avail-

able at present, which is admittedly scant, it would seem that Repco are trying to get the company a bit cheap. The directors of A and B are meeting today, and will no doubt make a speedy announcement. We may expect an explanation of the results for the year so far, and to what extent extraordinary writeoffs are perhaps responsible for the profit decline. The automotive division is believed to be efficient, and the group did reasonably well from the think-big projects. Repco Australia a few weeks ago announced a result that was 31 per cent down. Also, the Australian group must have taken into consideration that CER might be delayed. Their going ahead at this time suggests again that they are on to a cheap deal. Market observers also wonder how Repco can receive permission to acquire a 60 per cent interest in A and B when it already has 60 per cent holdings in MSI Corporation and Repco New’ Zealand, Ltd.