‘Trigger-happy Yanks’ blamed

Press, 21 October 1989, Page 34

‘Trigger-happy Yanks’ blamed

By

r T. K. de Castro, Jordan Sandman

What an extraordinary week for the Stock Exchange. One is reminded of Alvin Toffler’s book, “Future Shock,” published in 1970. Some investors will remember Toffler’s thesis, in which he said that time frames would shrink and markets would become more volatile in the decades ahead.

And the lessons? We are reminded of one of Frank Pearson’s stories when he was stockbroking in London many years ago. In the days of high East-West tension the city heard that NATO had a defence alert and the market fell heavily as a result. A colleague of Frank decided to buy on the basis that if bombs fell he would not be around to settle his purchases, and if they did not the market would recover. He cleaned up. Those investors who had the courage to buy shares yi New Zealand on Monday morning when our market was alone and very lonely in the investment world cleaned up as well. Here are some of the examples:

Mon. Fri. a.m. a.m. Brierley 182 2.20 +20.9% BNZ 90 110 +22.2% Cap. Markets 140 172 +22.9% The blame. For those who follow international markets Wall Street prices have been bid up-in recent months on the actual, and rumoured, MBO (management buy-out) and LBO (leveraged buy-out) offers. As we know finance for one of the largest of these offers fell over on Friday, October 13, and this was a major contributing factor to the 190

Were Christchurch office

point fall in the Dow Jones index of leading U.S. stocks. We can probably coin the phrase, “trigger happy Yanks,” because if investors had paused for a few minutes they would have realised that their own market was cheaper on fundamentals, such as price-earnings ratios and dividend yields, than it was a month after the crash of October, 1987. In this part of the world we can thank the Japanese investors who held the line last Monday and their action started to bring some stability to investment markets as the rising sun headed westwards towards Europe. On our local front worries about the DFC failure continue. Interest rates have risen on the bond market and may edge higher in the short term. Air New Zealand lists on Tuesday and this will be of considerable interest to many investors both new and old. The “grey” market yesterday suggest unofficial trades at 2.60. If the stags are satisfied to sell at this level (an 8% premium to issue price) it could be an excellent opportunity for investors, taking a slightly longer view, to top up their holdings.

What a farcical situation now exists with the listed company, City Realties. This week 71.7 per cent of the share capital changed hands when Tower Corporation sold to a shelf company, Zelas Enterprises. Investors are so far in the dark as to who the ultimate owners of Zelas are and of course have no idea of the intentions of the new owners.