SHAREMARKET Interest rates depress equities

Press, 9 December 1988, Page 20

SHAREMARKET Interest rates depress equities

Share prices took a beating on the New Zealand market yesterday as investors stood on the sidelines en masse to await the outcome of the most recent political events.

The Beehive soap opera now centres around the apparent move by the Prime Minister, Mr Lange, to bar the reappointment of a key aide to the Minister of Finance, Mr Douglas.

Even before the morning call Government stock was sold off in such quantity that the five-year yield w x as pushed up to 14.07 per cent, where it stayed for most of the day. It closed at 14.12 per cent, although at that rate buyers began to nibble. Needless to say, equities just cannot compete with a risk free rate of 14 per cent.

New Zealand stocks listed in Australia failed to hold up, contrary to expectations, as that market firmed a little during the day. Mr Derek Howarth, of Lawrence Millton and Howarth, said that although all world markets edged upwards after Wednesday when the Nikkei index broke through the 30,000 mark (up 381 points) this international consolidation of indices did nothing to reverse the weak trend in our market.

“Prices again eased with renewed selling, and by midway the NZSE gross index was down 4.48 points.

“The threat of continued political infighting spilled over into the afternoon session with leaders well down as sellers became dominant in a market lacking

genuine support. “The gross index closed down 11.05 points, a drop of 1.65 per cent on the day.

“Continued unease in the market place is expected in the short term — at least until the political wrangles are resolved, and confidence restored,” Mr Howarth said.

The Barclays index of Industrial shares dropped 32.40 points (2.0 per cent) to 1778.22, as falls outnumbered rises five to one.

Trading volume was in line with recent averages at 6.3 million shares, but value was down at $6.9 million — an average of 109 c a share.

Fletcher Challenge lost 7c to 443, Brierley Investments fell 3c to 115 c — its lowest level for many a year.