THE MARKET Bulls continuing their heady run

Press, 19 April 1986, Page 22

THE MARKET Bulls continuing their heady run

By ADRIAN BROKKING The present New Zealand bull market just does not know what gravity is as it keeps roaring along to ever higher peaks in hectic trading. Barclays index of industrial shares broke effortlessly through the 2400 barrier yesterday, only seven trading days after it moved above 2300, and just 18 days since reaching 2200. From the beginning of the year the index has gained more than 500 points, or 29.3 per cent.

Not only did it go through the 2400-barrier, it is more than half way towards 2500, as it closed last night at 2457.13, a gain of 63.11 points on the day and no less than 110.0 points for the week. It is still very much a two-tier market, with the top tier making most of the running, but this week second-line stocks had their turn on several days, as bargain hunters began searching out shares that might have been overlooked.

This may have been partly the result of a widely - publicised research document by Satterthwaite and Company, Timaru sharebroker, on 13 shares selling around 100 c each. The companies whose shares were recommended, in alphabetical order, were: Big Apple, Blandford, Cardrona, Charter, Clypex, Fleur, Greenhouse, Kaurex, Lakeland, Leyland Capital, Northrop, Thorough-

bred, and Waikato Stud. For the whole of the week Big Apple rose 3c to 58c, Blandford He to 70c, Cardrona was unchanged at 100 c, Charter gained 1c to 80c, Clypex 1c to 44c, Fleur lost 1c to 39c, Greenhouse was untraded, Kaurex lost 2c to 43c, Lakeland was steady at 60c, Leyland Capital put on 1c to 63c, Northrop fell 2c to 70c, Waikato Stud gained the same amount at 40c, and Thoroughbred rose 7c to 142 c.

Satterthwaites says that buying shares of a low dollar value has the advantage of low outlay, lower charges, and higher leverage than market leaders. By higher leverage the broker means that when these shares rise on the market’s coattails, their gains may be proportionately greater.

Satterthwaites also points out that the downside risk on lower-value shares is smaller than on higher-priced shares. However, it was the socalled international shares, and the shares of investment companies that moved the index.

Brierley Investments put on 60c during the week, to 540 c — a gain of 12.5 per cent. Fletchers gained another 6c after making 39c the previous week, NZ Forest Products 5c to 285 c, and NZI Corporation 20c to 180 c. Chase Corporation jumped 45c to $lO.OO, Equiticorp consolidated the gains of the previous week and closed 2c up at 502 c, Omnicorp rose 12c to 148 c and Rainbow put

on 13c to close at 495 c. An increasing number of brokers, and across the Tasman, are voicing the opinion that the New Zealand and Australian markets both need a cooling-off period. But they rule out a stock market crash — the most they are prepared to concede is a decline of 100 to 150 index points, which at the dizzy height the index has reached represents a fall of a puny 4 to 6 per cent. The stags did well this week, as every one of the four new listings sold above the issue price. Saudicorp did best, the shares, placed at 210 c, reached 310 c yesterday. Cashmere Pacific, the Wellington goat-breeding venture, hit the market at 55c and closed yesterday at 65c. The Pokens-based saw milling and home building company, Aitkenhead Group, and the par 50c shares opened at 65c and closed last night at 68c.

Aitkenhead issued, through a limited circulation prospectus, 12 million shares of which 9 million shares were taken up by the existing shareholders of the two Aitkenhead operating companies. The remaining 3 million shares were offered for public subscription, but in effect went to Aitkenhead family and associates, friends and customers. No sharebroker got a look in. Needless to say, the shares are tightly held, and there are only some 300 shareholders.