BROKER COMMENT Consensus: further falls

Press, 14 March 1987, Page 25

BROKER COMMENT Consensus: further falls

“The week’s market was disappointing, with dull and often lack lustre trading,” said Mr Ken Stevens, market operator for the Christchurch sharebroking firm Harkness and Company. The market opened the week on a strong note, but from there slid downwards, not from selling pressure, but as usual because of the lack of buying support in the market,” he said. “Activity was once again focused on the toptier stocks, with secondliners being kept out in the cold — because of few buyers, and an abundance of sellers.

“A good profit result from Brierley and various corporate activity throughout the week, did little to stimulate the market and looked to have an opposite effect to what one would expect.

“Black Friday was not quite so black with bargain hunters moving into tier stocks in the afternoon to push the market up 18.54 points. “Wc seem to have a

see-saw effect in the market, with blue chip being oversold then bought back at their apparent lows which does little to boost the confidence of the private investor of seeing the bull run of last year, with profit-takers not missing a chance to sell out on upward movements. “With the New Zealand dollar strong, high interest rates, a tax drain, and very limited institutional support the prospect of another bull market looks bleak. “Investors are not willing to risk large capital outlay for little and sometimes negative return as they say ‘once bitten twice shy,’ ”Mr Stevens said.

Indice points were dropped on four successive days of trading this week, although over-all points movements were not great, said Mr Brian Kreft, a director of Forsyth Barr and Company, Dunedin sharebroker. The characteristic was that these falls occurred on extremely low

volumes and the consensus among operators is that it is not taking much pressure to move share prices either way. Yesterday’s trading started on a very weak note with Brierley’s moving back to 400 c and selling at that price in volume. Other market leaders such as Capital Markets, Chase, and Euronational were also off the pace, and this caused the Barclays Index to fall through what were previously thought support levels. In addition to this action, a leading market tip sheet recommended that investors go short on the Stock Exchange futures market. The position changed in the afternoon, trading bounced back up about 60 points as support swung behind the leading stocks. Brierley’s closed at 412 c, Capital Markets at 540 c, up from the morning’s low of 525, and Chase added 7c on to its price, closing at 525. On the corporate front, there now appear to be three parties in the market for Progressive, with the intial bid at 425 c being topped by a Wellington broking house at 430 c. Latterly an additional Wellington broker has been offering 432. Steel and Tube also at the centre of attention, had good buying support at 190 c, while City Realties, which has been inactive from the last

flurry of corporate activity, is now under buying support at 86c.

“the consenseus appears to be that the market may ease further in the coming week, or that at best investors can expect it to move sideways,” Mr Kreft said. The era of special partnerships is now almost over, with promoters being unable to

fulfil the criteria set by the Government at the last Budget. As a consequence, the tax advantages of this type of investment vehicle have been nullified. The Alexandra-based Earnscleugh Orchards No. 1, Ltd, and Company, appears to be one of the last investment vehicles available for public subscription.

“While the initial subscription price of $12,500 a unit appears high, when one takes into account that there is an advance back to the investor of $4OOO the investment becomes more attractive. The tax write-offs available from this partnership, while not as spectacular as have been seen in the past, are still worthy of attention from investors seeking some form of relief while at the same time wishing to hold an investment.”

The issue comprises 96 units, and is scheduled to close within the next 10 days, he said.