TV3 debut not bad in sleepy maket

Press, 11 December 1989, Page 15

TV3 debut not bad in sleepy maket

By

MICHAEL SIDEY,

director

of For-

syth Barr If the sharemarket was theatre and the producer said, “Don’t wake up, we’ll tell you when it starts,” few brokers would have attended work last week. There was little interest shown in equities, certainly buyers for any volume of stock were lacking. Despite this, turnover in some leaders, especially Brierleys, was very high and the reasons are becoming obvious. The New Zealand sharemarket has not been able to capitalise on its strong correction from an oversold position earlier this year. Some overseas investors who were major buyers during the 400-point rise, are now looking at the economy and the performance of companies, realising the promised returns may be slow in arriving. They are therefore lightening their portfolios. This is particularly so with the Asian investors who tend to be more mobile than most. It seems that they have taken the stance that both Australia and New Zealand are going through a flat period, and for the small amounts of money (to them, but large to us) they have invested here, they are taking their small profits or losses and moving those funds to the Japanese market. In contrast with the New Zealand performance over the last 12 trading sessions, in Japan their index has recorded 11 all-time highs. These rises have been recorded on huge volumes and possibly come on the back of the statistic that the last quarter produced the strongest economic growth for the last five years. Institutions looking for equity investments are therefore attracted to that bourse. The problems for us are obvious, our market is small and it is always a risk when scrip goes offshore that it will be sold back into our market at a later date. If there are no buyers to take that excess scrip up the market weakens and so far we have been this drift occuring. TV3 was a new listing on the Barclays Index this week and performed relatively well in (his sleepy market. Expectations on listing were, that it would open at between 265 c and 280 c and hold

at those levels. The reasons for these expectations were the lack of scrip available to the market before the issue, no public pool, shortage of media sector scrip and generally, the recognition that television is the most popular medium for consumers. Also few television companies remain independent of a large shareholder for too long. However, investors gave the stock no honeymoon and it drifted back to a base price of 230 c where support levels were found. The abundance of sellers was put down to seed or original shareholders taking funds out that they had invested five years ago. The average cost for these investors is approximately $lOO and when one considers the risk that they took in putting capital into this venture the premium they are receiving is well earned. If TV3 had not become a listed company their return would have been nil and capital probaby lost. It will be interesting to monitor the performance of TV3 over the next six months as it battles with TVNZ for market share and recognition. The interest rate/exchange rate/ equity market scenario in Australia is quite fascinating. If interest rates were to decline, (and they will at some stage), the exchange rate would also weaken. This in turn makes Australian equities attractive to offshore investors because they can buy assets for less using the exchange rate. There is no doubt Australia has many high-quality international companies and despite an expected flatness in earnings they will continue to perform and be an attractive buy in the dips. This will certainly be the case for New Zealanders and other international investors if the Australian dollar weakens. lEL’s former managing director, Mr Russell Goward, is now under the spotlight that New Zealanders’ being traditionalists, find it hard to break habits. It would be premature to prejudge the performance of this company. It is important to remember that it has the backing of a major American media corporate — NBC.