FUTURES GSK set for run

Press, 23 January 1988, Page 34

FUTURES GSK set for run

A bull run prevailed on Government Stock futures early last week. However, scepticism crept in once the market took into account the high funding costs that could prevail over the next month as taxation flows go to the Government, Mair Astley Futures said. “There is a perception that as less Government bonds are going to be available in the 1988-89 year, it is worth buying them irrespective of slightly firmer up front costs,” Mair said. “Whether or not the Government fully funds its deficit from the sale of State Owned Enterprises will be the catalyst on which to take an aggressive stand in this contract.” Mair said the slightest hint of a need for more stock tenders could see the downward move in the interest rates halt. ■Dr Brent Layton, of Egden Wignall Futures, said that while the December quarter CPI figure of 2.1 per cent was hardly brilliant, futures prices surged up on Monday and Tuesday in response. Bank bill futures for February and March were sold down from mid-week. The rise in bill futures following the CPI figure was hardly sustainable. Liquidity conditions, rather than inflationary expectations, are more important for shorter term interest rates, and the tax payment period is nearly on us, Dr Layton said. Bank bills . Mair said the month end rise in short term bank acceptance bill rates is now apparent. "There are still varying views concerning primary liquidity, and perhaps the indicator to watch will be the scope of reserve bank open market operations over the next four weeks, with the demand for cash by the system and the rates paid by the system being important points to watch,” Mair said. Share index Turnover on the New Zealand sharemarket was low and activity on futures reflected this during the week. “The sentiment of investors is negative, but two schools of thought seem to prevail. One concerns the covering of one's tracks and the other is the presence of a beguiling attitude towards the sharemarket by those in a position of purchasing strength,” Mair said.

“While such defensive and ensnaring attitudes are prevailing, there is little chance

of a bull run on the New Zealand sharemarket. The probability of a blue chip equity sell off prevails with some saying that Barclays may sink below 1800.” Dr Layton said the all time low of 1850 was touched again on Thursday morning but the market quickly bounced from there.

■ “This is the third time 1850 has been touched twice in December and again this week. A breakthrough that level is likely to excite selling from chartists,” he said. Wool It was a case of “buy the rumour, sell the fact” in wool futures last week, Mair said. “Futures prices were expected to drop due to heavy seasonal supply of wool and the high New Zealand dollar. This has happened.” Mair said the downside of futures is limited for three reasons. First, the wool board will continue to support the auction market; second, there is a reluctance by traders to enter wool on to the futures market; and third, traditionally there is a lift in futures during the latter part of the wool sale season. U.S. dollar The observers of the United States economy want more positive evidence of improvement in it than one good United States trade figure, Mair said. This is why there was a sell-off of the United States dollar and an upward retracement of the New Zealand dollar, they said. "There are two things for the New Zealand dollar pundits to consider. The first is a possible slow down in the rate of the New Zealand dollar’s appreciation against the United States dollar. The second is the narrowing of the New Zealand offshore interest rate differential.” Mair said New Zealand interest rates are still high, and despite the fall in them, offshore investors may take a

view after condidering the impact of "Rogernomics” that New Zealand is still worth investing in. “Accordingly, such a perception and resultant action could put a bottom on the New Zealand dollar of about 6300, while 7000 becomes the top of a possible trading range. A perception that the New Zealand unit and Australian dollar attain parity against the United States dollar still prevails in some parts of the market." SUS CONTRACTS Mth Open H/L Last Vol Feb 5004 5004/5004 5004 1 Contracts traded: 1. Open positions at January 21: Feb 127, Mar 42, total 169 (down 120). COMMERCIAL BILLS Contracts traded: Nil. Open positions at January 21: Mar 1, Jun 10, total 11 (same). GOVERNMENT STOCK Mth Open H/L Last Vol Mar 85.67 567/552 555 713 Jun 85.81 581/580 581 15 Contracts'traded: 728. Open positions at January 21: Mar 1671, Jun 145, Sep 120, total 1936 (up 264). WOOL Mth Open H/L Last Vol Mar 632 632/630 630 5 May 646 646/646 646 1 Aug 670 672/670 672 7 Oct 690 690/690 690 2 Contracts traded: 15. Open positions at January 21: Jan 1, Mar 300, May 313, Aug 51, Oct 27, Dec 28, total 720 (up 13). 90-DAY BANK BILLS Mth Open H/L Last Vol Feb 82.90 295/280 8280 74 Mar 83.00 309/297 8297 31 Apr 83.40 360/340 8360 3 Contracts traded: 108. Open positions at January 21: Feb 385, Mar 664, Apr 41, Jun 220, Sep 195, Dec 181, Mar 31, Jun 17, Sep 5, total 1739 (up 95). SYDNEY ALL-ORDS (half-points omitted) Prev. Mth close H/L Last Vol Mar 1263.0 1280/1255 1280 747 Contracts traded: 747. Open positions at January 21: 4592 (up 57). BARCLAY’S SHARE INDEX Mth Open H/L Last Vol Mar 1880 899/880 899 24 Jun 1930 942/930 942 2 Contracts traded: 26. Open positions at January 21: Mar 348, Jun 7, Sep 52, total 411 (up 4).

N.Z. FUTURES MARKET WEEK ENDED January 22 Trading Traded prices Total Open months This week To date this cont’s

$US ■ High Low Last High Low week Feb '88 1.5394 1.5004 1.5004 1.5444 1.5004 603 127 Mar ’88 Totals PCP — — — 1.67401.5442 603 42 169 Mar '88 — — 8500 7800 — 10 Jun '88 — — Totals GOVERNMENT STOCK — 8430 7815 — 1 11 Mar ’88 8569 8528 8555 8569 8390 4450 1671 Apr '88 — —— — —— — — —— Jun ’88 8588 8563 8581 8588 8400 118 145 Sep '88 Totals WOOL 8605 8575 8605 8605 8520’ 7 4575 1201936 Jan ’88 630 615 615 750 541 20 17 Mar ’88 632 619 630 770 551 22 300 May '88 647 631 646 780 575 94 313 Aug '88 695 670 672 785 635 23 51 Oct ’88 700 690 690 735 735 3 23 Dec ’88 705 705 705 789 745 2 28 Jan ’89 _ _ _ 800 Totals Tenderable stock: bales. 35F2D quotes 99-DAY BANK ACCEPTED BILLS 800 164 732 Feb ’88 8350 8280 8280 8399 8220 267 385 Mar ’88 8365 8290 8297 8450 8000 355 664 Apr '88 8385 8340 8360 8385 8300 59 41 Jun '88 8440 8410 8440 8440 8100 19 220 Sep ’88 8485 8465 8465 8485 8100 21 195 Dec ’88 8500 .8465 8500 8500 8100 2 181 Mar ’89 — — 8500 8200 —A 31 Jun '89 — — 8500 8320 . 17 Sep ’89 _ _ _ Totals BARCLAY’S SHARE INDEX 8500 8470 723 5 1739 Mar ’88 1960 1850 1899 4290 1850 204 348 Jun ’88 1942 1930 1942 2055 1928 2 7 Sep ’88 Totals — — — — — 206 52 407