SHAREMARKET Steady recovery but indices down

Press, 21 February 1987, Page 25

SHAREMARKET Steady recovery but indices down

by i

ADRIAN BROKKING

A sharp fall, followed by a slow but steady recovery characterised the New Zealand sharemarket this week. However, in spite of three days in which market leaders bounced back, the indices yeiterday were still well below the levels of the previous Friday. The NZSE capital index, which covers all listed shares, closed yesterday at 1149.10, compared with 1177.67 the week before — 2.4 per cent down.

The Barclays index of 40 industrial shares ended the week 57.26 points down at 3154.88 (1.8 per cent) while the slightly more broadly based Reserve Bank index closed 2.9 per cent lower at 11,249.

Total sales were a moderate 49.8 million shares. 'fhe market is still being driven by private investors, many of them relatively small. There again was no evidence of institutional buying this week.

The brake on the markers decline immediately brought forth the optimists among market analysts, those bold enough to predict that the market has bottomed out and was set for another bull run.

Some, quoting Elliott wave theory, said the market would reach during the next wave 4000 on the Barclays index. However, analysis of the behaviour of that index since its all-time peak does not confirm this, even if one were a believer of the theory. Since November 10 the index has shown up six waves on a graph, with successive high points lower than the previous one, and the low points also successively lower. There is no sign that this tread has been broken. On November 10 last year the index reached its all-time high of 3912.93, and then began to slide.

It rapidly reached a low of 3677.46 a week later, then rallied to 3822.57 on November 21 — the first wave.

The second wave went through a low of 3776.99 on November 27 back to 3806.60 on December 1. In the next week it fell to 3700.64 and had bounced back to 3787.32 by December 9 — the third wave. Wave number 4 reached a low of 3754.72 on December 12 and a high of 3793.48 on December 17 — two days before the stock exchange closed for the year. In the new year the market went into a steep decline, and by February 2 the index had fallen to 3183.05. However, a modest rally had it back to 3293.83 on February 9.

Once more a steady decline took the index down to 3043.00 last Monday, and the recovery of the past three days saw it close yesterday at 3154.88 still well within the trend channeL The description of these six waves has left out the small daily fluctuations. We would need to see a longer-lived and more substantial recovery before accepting that the medium-term trend has been reversed. Company news was relatively scarce this week, with the good and the bad fairly evenly balanced. Rainbow Corporation and Progressive Enterprises announced merger plans to create a new group, Astral Pacific, that will be among the 10 largest listed companies in New Zealand. Rainbow will also form a new company to embody its shareholding in Astral, and both Rainbow and Progressive shareholders will have the opportunity to subscribe for more shares. Kupe Group and EuroNational Corporation simultaneously issued

“don’t sell” notices. A merger between these two companies has been long on the cards, as they have been very close for some time.

Euro-National holds 47.1 per cent of Kupe, and market observers have expected it to make a full bid for Kupe. However, rumour has it that there could be more to it than just a merger. A bid for NZ Forest Products by the merged company has been mooted. Caxton Group, Ltd, the large privately-owned paper company, has a 27.5 per cent shareholding in Euro-National. Last year Euro-NationaTs chairman, Mr Rod Petricevic, and Caxton’s managing director, Mr John Spencer — reputedly the country’s richest man — said that they planned to make strategic investments in industries allied to either company, through a joint venture company.

New Zealand Marine Farms announced a liquidity crisis on Monday, and its 100 c shares were rapidly sold down to 20c before recovering to 45c. At this price the company will find it hard to find equity capital.

Losses were announced by Bowen Corporation and Enzed Technology, while Ivon Watkins-Dow reported a $4.4 million

profit slump. Good profit reports came from Renouf Properties, Argus, the Christchurch Press Company, and Mair Astley, which also announced rights and bonus issues.

Smiths City Market’s printed half-yearly report confirmed the excellent report made to the stock exchange last December. The high quality of the

group’s reported earnings is unquestionable, and the sharemarket has recognised this by maintaining the share price against the present over-all weak trend.