THE MARKET Market falls sharply on low volume

Press, 1 June 1985, Page 22

THE MARKET Market falls sharply on low volume

By

ADRIAN BROKKING

The New Zealand sharemarket gave more ground this week as the weaker trend that became evident in the previous week carried over, and Barclay’s index of industrial shares lost 38.74 points to 1533.37 after touching a low of 1528.04 on Thursday. However, trading volumes were low, and averaged less than 3.5 million shares if the sales of 4.6 million NZOG shares on Tuesday are excluded.

There was certainly no panic selling or anything remotely like a crash.

Rather the market is making a correction for a post-Easter bubble that did not appear to be warranted by fundamental economic considerations.

Many market observers are inclined to blame Mr Bruce Hancox, the executive officer of Brierley Investments, and Mr Rufus Dawe, chief economist for Westpac Banking Corporation, for “talking the market down.”

They pointed out that economic activity would decline in the coming 12 months, and warned businessmen to proceed with caution, as they did not seem to pay as much attention to the signals from the Government as perhaps they should. All one can say to that is that it is not easy to talk markets either up or down, no matter by what authority. The most you may expect is to reinforce a trend. For such remarks to have such devastating effect investors would have to be in a receptive mood, with the

{hts preceding ticket numbers are not shown in published results. Warwick Kiddle.Organiser New Zealand Lotteries. Box 110 Wellington. Drawn by marbles and barrel. 30th May. 1985

market already inclined to weakness. Not that the remarks themselves were incorrect. We are undoubtedly in a stage of the business cycle that will lead to . a lower level of economic activity. This had been forecast much earlier by the Government and by the N.Z. Institute of Economic Research, and is one of the main reasons why some analysts felt obliged to observe that the sharemarket was ignoring fundamentals. For the first time in many moons consumer spending seems to be slackening, although many retailers expect demand to increase in the run-up to GST.

pated. FTC increased group taxpaid profit 14.3 per cent to $18.9 million.

Wilson and Horton, Auckland publisher of the “New Zealand Herald” had a profit rise of 60 per cent to $lO million. Reuters PCL contributed $1.7 million and United Press and Publishing six weeks earnings. ICI New Zealand announced a 1:5 bonus issue after a modest profit increase of 2.1 per cent to $7.6 million in the six months ended March 31.

Landmark Properties, Ltd, more than doubled its tax-paid profit, to $5.5 million. Landmark declared a 1:8 bonus and is making a 1:6 options issue. Welgas Holdings, 49 per cent-owned by Brierley Investments, almost trebled profit to $3.3 million, including equity-accounted profits of more than $1 million from other Brierley Investment offshoots Auckland Gas and East Coast Gas Supply.

One of the country’s largest department store chains, Farmers’ Trading Company, experienced a reduction in sales in the latter part of its financial year which ended March 31.

Consolidated Metal Industries had a 29.9 per cent profit rise to $4,070,000 in the 12 months ended Marc'31. CMI has changed its balance date to June 30, and will then be reporting on a 15 months financial “year.” Waikato Stud is making a 1:10 bonus issue after reporting a maiden tax-paid profit of $566,314 in the 10 months ended March 31. Pacer Corporation, offshoot of National Bloodstock, reported its first fullyear profit — $345,811. A 1:5 bonus issue is planned by John Webster, men’s wear manufacturer, the Auckland company made a group net trading profit of $l.B million. The profit of Salmond Industries for the year rose 26 per cent to $2.9 million. Computer Consultants Ltd, Wellington, increased after-tax profit 72 per cent to $1,220,000.

Its chairman, Mr R. H. Busfield, said in his report that after a successful first half, the second period started with buoyant sales in October and November but that since the Budget retail sales increases had fallen away for the rest of the year. Mr Busfield was in agreement with other retailers when he observed that many purchases were made on credit. As the company saw no lessening in the demand for credit, FTC had increased consumer interest rates to reflect more accurately borrowing costs. There was a spate of profit announcements during the week, but they failed to enthuse the market and had obviously been antici-

A strike by a small proportion of its workforce held the profit increase ol Firestone to 7 per cent.

Masport also issued a disappointing report which did not quite come up to the prospectus forecast. Further profit reports - by OHL Corporation, Autocrat Sanyo, and Irvin and Stern — appear in today’s columns. Feltex New Zealand, Ltd, came full circle this week when a it returned to Australian sharemarkets as a wholly-owned New Zealand company. Feltex was formed in Sydney 56 years ago as Felt and Textiles, and became, on Thursday, the third New Zealand company to be publicly listed in Australia. Feltex became a New Zealand company in 1941 when various subsidiaries were restructured in one entity called Felt and Textiles, New Zealand, Ltd. It went public in 1945, but 51 per cent of the capital remained in Australian hands. In 1969 Feltex became a wholly New Zealand-owned group when F and T Indus-

,tries, Australia, made a public offer of its 51 per cent holding.

Feltex claims to be the largest - woollen carpet manufacturer in the world, and also to be the largest manufacturer of synthetic carpet in Australasia. It has now 30 per cent of its assets in Australia. Sharp falls were chalked up yesterday by NZ Salmon Company and NZ Marine Farms, Ltd, because of the whirling disease scare. However, the Ministry of Agriculture and Fisheries has said that newspaper reports were exaggerated and that it would give a “more balanced perspective” (see page 23). Sir Ron Scott, chairman, advises that Marine Farms, Ltd, considers that it is at little risk from whirling disease, and Mr Peter Townsend of NZ Salmon Company, says that he is confident that the disease “will not adversely impact our operations or our export marketing programme.”