THE MARKET Record on record in heavy trading

Press, 26 July 1986, Page 24

THE MARKET Record on record in heavy trading

After two relatively quiet days the New Zealand sharemarket really took off, with the Barclays’ index of Industrial shares reaching a new alltime high on every consecutive day, coupled with very high turnovers. The index closed yesterday at 2757.02 — an all-time high and 45 per cent above its opening level of the year. The rise for the week, of 48.82 points, is the equivalent of almost 2 per cent. The total turnover for the five days, 58.6 million shares, is a record, as is the daily average of 11.7 million.

Second-line stocks contributed much to the advance, more than they have done for quite some time, but the tone among the leaders appeared to be a little easier on balance.

The market was more volatile than the steady increases might suggest, with some participants talking of pre-Budget jitters. However, there is really little evidence of this and investors appear

to be much more confident than in the past of the Government’s steadfastness and sense of direction.

And if there was any nervousness, it was soon dispelled by the tone of Wednesday’s speech to bankers by the Minister of Finance, Mr Douglas, who reiterated that the Government would maintain its economic stance.

But Mr Douglas did little to cheer the money markets, as he warned that it would be more difficult to keep Government expenditure under control this year — the size of the fiscal deficit and the increased funding necessary has put a damper on these markets for some time.

Mr Douglas also made a reference that Government borrowing might be reduced by privatisation of public enterprise — the sale to the public of shares in BNZ, NZ Steel, and Petrocorp, for instance. ’ The economic recession so far has conformed to the "soft landing” scenario, but there can be no doubt that some companies are going to find the next six months pretty difficult.

Once the "pre-GST” buying spree stops we may see a drastic decline in economic activity, and

it will be most illuminating to see the reports of those companies covering the second half of the calendar year, which includes the three months October, November, December. More than ever investors should pay attention to companies with strong management, good cash-flow, and high-qual-ity earnings. Corporate activity once again provided most of the cash that fuelled tlie market. A stand by an unnamed bidder for 10 per cent of Farmers Trading Company kicked tlie game off. Jarden and Company, offering 210 c did not get it all its own way as interests friendly to Chase hopped into the pay bidding 211 c, the price at which the shares closed.

The big news of the week was the revelation that Brierley Investments was the big buyer of New Zealand Insurance shares. The company said it had purchased 72 million shares in NZI both on and off market, and now owned 16.7 per cent of the insurer. NZI closed 3c down at 200 c yesterday, with 1.3 million shares traded; Brierleys said it did not intend to raise its holding to more than 20 per cent.