MARKET CLOSE: NZ shares drop, Trade Me, Chorus, NZME fall

New Zealand shares fell for the fourth straight session on Friday, led lower by Trade Me Group, Chorus and NZME as News Corp sold its stake in the local news provider at a deep discount.

The S&P/NZX50 Index dropped 29.47 points, or 0.4%, to 7167.82. Within the index, 29 stocks fell, 12 rose and nine were unchanged. Turnover was $140.3 million.

The local index was down 2.6% last week and is near a three-month low, having seen heavy selling as the appetite for yield appears to be drying up as the US Federal Reserve has indicated it's closer to interest rate hikes.

"The key thing that's changed has been this chase for yield, which in our view had driven many New Zealand names past fundamental fair value, so it's left a bit of a gap as the chase for yield around the world has been unwinding,"  Matt Goodson, managing director at Salt Funds Management, said. "There are two reasons for it: one, the views of the Fed, and the potential that November could even be time for a rate rise while December's looking quite certain; and secondly, the Japanese central bank has changed from quantitative easing to yield targeting.

"For what has been a relatively moderate lift in long bond yield returns around the world, yield stocks have been smoked and New Zealand is full of many companies with high yields but limited growth. Having been an extraordinarily strong performer, New Zealand is coming under a little pressure – at long last," Mr Goodson said.

Trade Me Group led the index lower, down 4.4 percent to $5.38. New Zealand Refining Co dropped 2.8 percent to $2.42 and Metlifecare declined 2.8 percent and $5.92. The auction site is facing a new challenge from Facebook.

Chorus shed 2.3 percent to $3.76. The telecommunications company has handed more of its New Zealand ultrafast broadband network work to Australia's Visionstream while warning the cost of the project will be at the top end of its projected range. It's also weighing up its future capitalisation policies over next generation access costs that weren't in scope when Chorus was carved out of Telecom and will update guidance later in the current financial year.

"What's unclear is when you (are) a regulated asset, there's a cost of building out those lines and connecting them when you move to a new regulatory framework. Presumably that will be reflected in a new asset base they're allowed to earn a higher rate of return on but that future regulatory setup is not entirely clear," Goodson said.

Heartland Bank was the best performer, up 2.7% to $1.50 while Spark New Zealand gained 1.7% to $3.51 and Fletcher Building rose 0.9% to $10.27.

Outside the benchmark index, NZME fell 4% to 73c . News Corporation has sold its 14.9% stake at 67.8 cents per share, a significant discount, in transactions on both the NZX and ASX.

CBL Corp dropped 0.5% to $3.68. The Auckland-based credit surety and financial risk insurer, which raised $60 million to help fund its international ambitions, has declared an interim dividend of 3 cents per share. CBL posted a first-half profit of $18.6 million, or 8.49c , in August, though its register has since expanded with the share sale to institutional investors who are entitled to the dividend.

(BusinessDesk)