Sharebrokers comment

Press, 1 June 1985, Page 22

Sharebrokers comment

“This was the week in which the market began to discover the laws of gravity again,” said Mr John Wignall, Christchurch sharebroker. “High interest rates, some diappointing company news, and pessimistic remarks on the economy had a bearish influence. “However, at the end of the week the market steadied, and at Friday’s close it was distinctly off the bottom, and probably firmer than the index showed. “The Industrial Equity Pacific tender attracted a lot of interest, as the tender price was struck at SHKIS (about $NZ4.35) everyone in the tender has a nice little bonus,” Mr Wignall said. “No doubt Brierley Investments was conscious of getting investors an early sweetener. • “The finance sector is weak, and the property sector looks downright bad — high interest rates have seen to that. “New issues are taking a heavy toll, and until these and the Government Budget are out of the way, the market is unlikely to take off,” Mr Wignall said. Mr Peter Buttle, partner in the Auckland sharebroking firm Buttle and Company, said that the market at the moment was delicately balanced, but that he could see it drop further as the fundamentals were not attractive. In the short term the profit results had been anticipated by investors, and it needs exceptional profits to excite the market, he said. On technical grounds the market is also in delicate balance, as it is now close to trend-line. “If it were to break through it on the downside, the market might well drop

substantially, but if it were to firm and move away from the line on the upside, it would augur well for future strength,” Mr Buttle said. Mr Brian Kreft, a Dunedin sharebroker, said that the decline in the market this week could be largely attributed to two major factors:— The continuation of the technical reaction as a result of the prolonged six to eight week rise, and the pressures to fund commitments resulting from the Industrial Equity Pacific tender. At the close yesterday the position looked to have stabilised itself, he said. The week was not without its crises which included the Intertasman/Williams control struggle which seems to have resulted in a settlement,” the dramatic events on the Rakaia River and the flow-on effect to New Zealand salmon — which in turn resulted in an over reaction by ill-informed investors. Investors need to be selective when considering new floats and this evidenced itself by the disappointing listing of Commodore Computers as against, for example the substantial demand for Queenstown resorts, which opened and closed “heavily oversubscribed.” “Investors who took part in the tender for I.E.P. will be extremely pleased at the tender result which sets a very good base price for continued investment in the stock. “Without wishing to belabour the point, volatility in the market will increase as the market runs down towards the Budget. Interest rates continue to harden and this will also impact on equity prices. However, these factors considered the market should enter a con-

solidation period some time in the coming week,” Mr Kreft said. “Mr Hector McPherson, of the Timaru broking firm, J. S. Satterthwaite and Company, said that although no one could have predicted the remarks by Messrs Hancox and Dawe, the subsequent correction had been good for the market. Investors who had missed out on buying orders because of the rises had been able to get their shares on the downswing at the desired price, and quite a number of transactions went through although scrip was still scarce. At the end of a busy week the market took on a steadier tone, he said. Most offshore markets were firm except Australia.

Interest from New Zealand centered on ACI because of rumours that Omnicorp is buying into that company, and Ariadne, which recovered a little — which promises a bit more for the rights. With regards to Omnicorp, its chairman Mr Alan Hawkins, refused to comment. “Further offshore, many New Zealanders enjoyed pretty cheap entry into Hong Kong’s Industrial Equity Pacific when the tender price was struck at SHKIS,” Mr McPherson said. In the New Zealand markets some factors seem to point to a weakening of interest rates in the longer term, which would naturally benefit the sharemarket, he said.