THE MARKET Investors $800M poorer

Press, 3 February 1987, Page 19

THE MARKET Investors $800M poorer

The New Zealand sharemarket wiped another $BOO million off the value of listed shares yesterday, in nervous but light trading. In its fourth successive low for the year Barclays’ index of industrial shares shed a further 78.73 points to close at 3183.65 — 15.9 per cent lower than the beginning of the year, and 18.6 per cent below the all-time high of November 10. Falls outnumbered rises five to two, but only 7.4 million shares changed hands, for $17.5 million, or 238 c a share. Private investors, rather than institutions, remain the dominant force in the market, and are likely to remain so in the short run. Many institutions are channelling investable funds overseas (see reoort

on National Mutual, the huge Australasian insurance company, by Neill Birss on page 21). What everyone wants to know now is when is the market going to bottom out? Chartists believe that the bottom will be reached at 3000 on the index. That would be a retrenchment of 23.3 per cent. There have been seven long-term declines in the index since its inception in 1967. The average fall of these is about 20 per cent; the worst decline was from middle 1973 to end 1975, when the market fell a little more than 40 per cent. So on historical grounds, as well as ritualistic charting, a predicted bottom of 3000 could well come true. Against this, it should be observed that the boom of the last three years took the market for an unprecedented steep rise, and that the corresponding decline could well be equally

By

ADRIAN BROKKING

steep. On fundamentals also, the all-time peak of 3912.93 was exceptional, and far surpassed all previous peaks. If the market were to come down to the average P/E ratio of all previous peaks, one would expect an index figure of about 2700. However, these mechanical calculations do not take into account such imponderables as investors’ mood and the whole question of how companies should be rated in the financial climate of the last two years. Our guest sharebrokercommentator, Mr John Hutchinson, market operator for the Christchurch sharebroking firm Anderson Reid and Company, said: “A weak day’s trading with very few stocks showing any sign of recovery. The market looked as if it was going to pick up early in the morning’s trading, but this was short lived.

“Robt Jones stood out, taking a major drop, selling below the 200 c level, and making the current rights issue virtually worthless,” Mr Hutchinson said. Brierley Investments was unchanged at the close at 400 c, but fluctuated wildly between 425 and 378. It was the volume leader, with almost 800,000 shares crossed. Brierleys is one of the shares heavily bought on margin, and now suffering from margin calls. Capital Markets is another such one, and it fell another 50c to 510, after gyrating between 560 and 505. Many other entrepreneurial stocks were in the forefront of the falls: Rainbow Properties slumped 70c to 205, Tag 60c to 480, . Jarden dropped 30c to 230, Rainbow 28c to 392, and 20c falls each were posted by Omnicorp at 135, Smart Group at 230, and Hellabys at 320; Equiticorp lost

19c to 461. Renouf Corporation dropped 48c to 650, possibly on nervousness ahead of Thursday’s announcement. Euro-National went against the trend with a 33c rise to 425, after the announcement that it had bought 47 per cent of Kupe Group. The target, Kupe, fell 20c to 255. Chase Corporation was another share to have a roller-coaster ride: it traded in a range of 562 to 525 before closing at 540, down sc. Europac was 200 c cheaper at $30.00, while Entregro lost 15c to 220 and Crown to 185. Among blue-chip industrials, Fletcher gave up 20c to 460, Ceramco the same amount to 1180, Magnum also 20c to 600, while LD Nathan slumped 40c to 730 and Carter Holt was 10c down to 415. Mainzeal also featured among the falls, down 15c to 155, and NZ Forest Products 10c down to 395.