N.Z. market jittery, but not because of overseas

Press, 26 May 1984, Page 22

N.Z. market jittery, but not because of overseas

By

ADRIAN BROKKING

Christchurch sharebrokers are unanimous in their opinion that the sharp falls in Sydney and Wall Street share prices are only a minor influence on the New Zealand share market. Some of their North Island colleagues back their views. Buttle, Wilson, and Company, the Auckland sharebrokers, and Jarden and Company, of Wellington, have been generally bullish about the domestic sharemarket, and have advised clients to hold but to buy selectively. In the last few days Wall Street and Australian share prices have tumbled. The Dow Jones index is at its lowest for more than a year, and intense Selling pressure sent Sydney share prices to a six months low. Australian brokers see the Australian market as linked to Wall Street, and hold out little prospect for an immediate upturn unless Wall Street rallies. The New York decline is being attributed to higher interest rates and fear of a banking collapse. The sharemarket this year had become much more susceptible to political moves, said Mr John Wignall, a partner with Egden, Wignail and Company. At the moment it was even more jittery than normal, but it would recover, he said. The return of the Prime Minister, Sir Robert Muldoon, would move interest rates downwards, and this would help the sharemarket. Mr Wignail sees a longterm rising trend. The New Zealand market moved in some sympathy with overseas markets, but basically was not affected by them, he said. There had been little buying support in the last few days, said Mr Ken Lee, a partner in Hamilton, Hindin, and Greene. From now on greater market fluctuations may be expected. Prices are not expected to fall too far, he said, because the profit reports coming through are very good. In many cases the profit improvement related only to the final four months of the March 31 financial year. “If this trend is projected through this year this improved profitability woud carry over. On this basis present share prices are fully justified.” Because of higher dividends and bonus issues

many investors, depending on their tax status, would achieve little by switching to fixed interest securities. Mr Lee also did not think that the New Zealand market was much affected by share trading trends overseas. As we have few overseas investors here, the mood of overseas markets is only transmitted to a minor degree. Because of the many good results and bonus issues the New Zealand sharemarket should be capable of holding its own, said Mr Brian O’Malley, of Sturge, Wilson and O’Malley. As the improvement had shown up only in the last six months, if the trend were extrapolated current improved profitability should be maintained at least. The market therefore was not overvalued, Mr O’Malley said, although it has had to readjust to fundamentals, just as markets overseas. “Although the market at the moment is weak, weakness in overseas markets has in the past had little influence on the New Zealand sharemarket,” said Mr Tim Lawrence, of Lawrence, Millton, and Howarth. “We think the market is overpriced, and advise short-term investors to be cautious. We expect share prices to continue falling slowly, but do not expect a sustained heavy fall as has been the case in Australia, because of the good results of our local companies that will come through this year.” Other North Island sharebrokers are more pessimistic. O’Connor, Grieve and Company, the Wellington broking firm warned its clients in March to consider progressively leaving the market, and the Auckland firm Hendry Hay Smythe and Horton has issued similar advice. Mr Tim Savage, a broker with Hendry Hay Smythe and Horton, said that the New Zealand market was overvalued, and that the overseas declines would eventually correct it. He said that in spite of falling interest rates the earnings yield on shares was below that for one-year debenture stock. “At some stage the change has got to come, and when it does it will be quite rapid. When the sharemarket ceases to be as fashionable as it has been in the past 18 months, the falls will be quite large,” he said.