Small punters bolt from sharemarket

Press, 20 October 1987, Page 25

Small punters bolt from sharemarket

By

NEILL BIRSS

The sharemarket yesterday took its biggest dive since the "A-Letter” fall on May 18. The Barclays index plummeted 154.68 points to 3430. On May 18 it fell 174.3 points in a slide many believe was triggered by “ALetter” advice to clients to sell all stocks. Small investors are now running from the market leaders, and institutional investors are on the sidelines. The bad news from overseas sharemarkets is seen as the fright making the small investors bolt. Most market watchers believe a New Zealand market crash is not imminent, but that the market may fall a few more hundred points. Yesterday’s fall wiped 4.5 per cent off the capitalised value of the market, with the market leaders at the head of the avalanche. The Stock Exchange gross index was 44.01 points down yesterday at 1242.01, apd the capital index was 45.63 points down at 1194.96. Since last Tuesday, the Barclay’s index has fallen 254 points, or 6.9 per cent

Falls outnumbered rises 145 to 42, or about 3.3 to 1. Volume was fairly heavy at 16.67 million shares, worth $35.34M, and was notable for the number of small parcels traded. The Barclays futures contract slumped even more than the physical index yesterday. It dropped 269 points, or more than $5300 a contract, to 3405 at the last trade. This is a premium of only 25 points over the physical index. Of leading shares, Brierley Investments fell 26c to 443, and trading in a range from 442 to 467. Fletcher Challenge fell 27c to 610, and ranged from 608 c to 650. Robt Jones Investments fell 32c to 230, in a range from 230 to 277. Chase in heavy trading (1.24 million, worth $45.5M) fell 14c in a range from 436 to 450, and Carter Holt fell 15c in a range from 380 to 409. N.Z. Forest Products fell 20c in a range from 450 to 472 and NZI dropped 9c in a range from 286 to 293. Goodman Fielder fell 25c, Judge Corporation 25c, Pacer Pacific 90c,

and Equiticorp lost 15c. Mr Tim Preston, of the Christchurch broker, Hamilton, Hindin, Greene, said many in the market had been expecting a correction for some time. However, many of those selling over the last few trading days were smaller investors who had entered the market comparatively recently. — Many of them had borrowed money to invest in Issues such as Brierley’s, Robt Jones, and Fletcher Challenge. When capital gains disappeared and they were trapped with a loss, and paying interest at rates not falling as fast as they had expected, they stampeded out. A second factor was the New Zealand dollar, Mr Preston said. Its recent drop had probably tempted a number of overseas investors, who were very interested in Fletcher Challenge and Brierley, to take profits and remit them at a good exchange rate. Buying by overseas investors was noticeably absent at present. A third factor was the nervousness spreading to New Zealand from falling overseas sharemarkets. Some were asking whether the bull run had ended in New Zealand. “I don’t think it has,” Mr Preston said. “Some good economic things are happening. The lower Consumer Price Index is one,

and interest rates will come down.” However, Mr Preston believes that the sharemarket has the potential to fall further in the short term: perhaps by as much as 200 points to 3200 on the Barclays index. Mr David Templeton, of the Christchurch branch of Jordan, Sandman, Smythe, Ltd, said market analysts commented that yesterday’s price fall was marked by complete absence of buyers, but sellers were prepared to meet the market. “Trading was orderly in that there did not appear to be any signs of panic selling, although some sizeable transactions were recorded. "We were not surprised by the direction of the market which occurred oh the back of a significant drop in Wall Street on Friday. This, with similar declines in other overseas markets has emphasised local investors’ gnervousness. Institutions seem content to sit on the sideline, although some have traded selectively, while most selling pressure seems to have come from private clients. It seems that worldwide investor sentiment remains unchanged, in that observers believe that rather than entering the start of a bear run markets generally are taking a long overdue correction,” Mr Templeton

The dilemma for local investors was how far would this trend continue. "It is not that long ago that the New Zealand market moved against world trends during its own correction phase, as a result of which it now appears relatively cheap by world standards. Investors should note that there is evidence of com-puter-assisted programmed trading during the decline on Wall Street and it seems that the same comment can be levelled towards the pattern of trading on the New Zealand exchange in recent days.” The immediate outlook for the New Zealand market remained uncertain as investors looked internationally for some reassurance and emergence of a consolidation phase, Mr Templeton said. What do chartists think of the slide? Benedict Fumicz, of Egden Wignail Futures and Company, Ltd, of Christchurch, said the Barclays physical index had gone off the charts. A big gap had been left by the opening yesterday 95 points under the Friday close. An Elliott wave interpretation might suggest that the market had the potential to fall another 155 points through about 3400, Ms Fumicz suggested.