Market subdued in slack trading

Press, 10 January 1987, Page 25

Market subdued in slack trading

By

ADRIAN BROKKING

The New Zealand sharemarket began the “year of the rabbit” on a subdued note in slack trading with prices falling on low volume. Market operators had to work hard to move stock, and on Tuesday there was so little business that the exchanges closed early. Barclays’ index of industrial shares fell 43 points during the week, or 1.1 per cent, to 3743.69. Total volume was 29.3 million shares, about half of the volume in the last quarter of 1986. However, next week many more investors will return from their holidays, and trading is likely to become more lively and, if history repeats itself, will be back to normal by the end of the month. Last year the first three days’ trading was frenetic with Barclays’ index of industrial shares rising 3.1 per cent. But then the market went into a tailspin, and eight consecutive losses took the index down 5.4 per cent to 1854.33 which proved to be the low point for the year. The contrast this year is even more marked as overseas sharemarkets are continuing their bull runs. In spite of the market’s recent weakness the majority of brokers re-

main optimistic in their expectations of another good year for investors. As Francis Allison Symes and Company, the Wellington sharebroker, said in their market letter: “we remain positive about the outlook for equities in the new year.” But most brokers are becoming a little more cautious in their advice, emphasising selectivity and the spreading of risk overseas. “Investment in quality stocks” is the watchword. Forsyth Barr and Company, the Dunedin sharebroker, emphasises three major criteria investors should apply when assessing companies for investment. They are • The calibre and reputation of the people involved. • The industry sector and the company’s position in that sector. • The quality of the earnings, and the realistic attainment of profit projections. This broker suggests the following eight stocks to watch for in 1987: Brierley Investments, Chase Corporation, Equiticorp, Rainbow Corporation, Euro-National, Capital Markets, Mainseal, and Wilson Neill. The Wellington sharebroking firm Jarden and Company applies much the same criteria. It considers that quality stocks should have the following

characteristics: • Above average management teams. • Good cashflow based on high quality earnings. • Positioned in industries with sound growth prospects independent of Government assistance. Another Wellington sharebroker, Renouf Partners, also emphasised the quality of profits. The firm’s market letter said: “Many stocks are achieving record results with the assistance of entrepreneurial profits, the inclusion of unrealised gains, and low tax rates. “We recommend that investors review their portfolios, cull the poor performers, and take profits on the higher risk stocks in the early stages of the 1987 year. These released funds should then be directed into individual offshore stocks. The introduction during the week of share index futures means that investors now can protect against downside risk from holding shares in a falling market. The contract began quietly, with 193 trades for the whole of the week, but is bound to become very popular. On Monday the price fluctuated wildly as traders tried to discover a trend, but it settled down fairly quickly, with the March contract quoted around 3750.