THE MARKET Overseas interest buoys market

Press, 3 August 1985, Page 22

THE MARKET Overseas interest buoys market

By

ADRIAN BROKKING

The New Zealand sharemarket bounced back strongly in the latter part of the week, as overseas interest returned and New Zealand institutions began against to buy selectively. Barclay’s index of industrial shares rose 8.71 points to 1745.14 for the week, after a low of 1724.62 on Wednesday. Volumes were also higher than in the previous week. The number of chairmen warning shareholders’ meetings that profit will not be as good this year is increasing, interest rates are rising rather than falling, inflation is high, our strong dollar is not helping exports, and a fair measure of industrial unrest soon is most likely, but the onward march of the sharemarket is unstoppable. It would appear that the New Zealand market is mirroring the performances of overseas markets, both in the check it received earlier in the week and in the way it recovered later. Of course, the Australian sharemarket has danced to the tune of overseas investors for many years. It is noticeable that particularly the New Zealand stocks listed in Australia

move up and down with this market and continue to outperform the New Zealand market as a whole — assisted by the good performance of such shares as Goodman Group and Pro-

gressive Enterprises. It is also these shares, because of their great “weight,” that move the index.

A key factor in the market’s behaviour is the strength of the New Zealand dollar, and its influence is ambivalent. A strong New Zealand dollar of itself would discourage foreign investment, but only if it was thought overseas that it might be near its peak. As always in the markets, it is the expectations that set the tone. If overseas investors expect a strong dollar to rise even further, it makes sense to buy New Zealand shares. If the expectation is for a decline, it not only makes no sense to buy, but the sensible thing to do — for a foreign investor — is to sell.

It is this sort of thing that will be a contributory factor to the market’s volatility.

The chairmen 'Of Ceramco, New Zealand Steel, and Winstone added their voices to the previous warnings of a slower New Zealand economy and the expectation of lower profits. However, for Ceramco, Mr John Fair said that in spite of this the company would still improve its profitability. The chairman of Progressive Enterprises, Mr Roger Haworth, said that he expected a half-year profit ’‘acceptably higher than last year.” Allflex also expects an improved profit, but Mr Bill

McPhail said “it would not be as spectacular ... as in the past.” The company is making a 1:5 bonus issue. A new and little-known listing, Anson Investments, stood out in the market this week as its 50c shares were chased up to 160 c by the close yesterday.

Anson has 8 million, shares on issue, of which 70 per cent are under the control of four directors. Two of the directors are also directors of Chase Corporation, and this company is also a substantial shareholder.

The tightness of the scrip goes a long way to explaining why the share price is so high; the “blue sky” character of the investment is another factor.

Yesterday’s bull run on the New Zealand sharemarket was no doubt sparked by the on-market bid for a substantial bid and substantial holding in Cable Price Downer.

An Auckland sharebroker, Buttle Wilson and Co, announced that it was in the market for CPD for an undisclosed sum and for a unidentified buyer. Brokers said there were no theories as to who the mystery buyer could be, but it was safe to assume the buyer was not Crown, with which CPD has a reciprocal arrangement to take up to 50 per cent of the other in the event of an unwanted take-over bid. CPD rose 22c to 422 c.