MARKET CLOSE: NZ shares fall into correction

New Zealand shares dropped into correction territory yesterday, led lower by Metro Performance Glass and Sky Network Television while Xero gained after delivering its first-half results.

The S&P/NZX 50 Index fell 74.82 points, or 1.1%, to 6778.93. Within the index, 36 stocks declined, eight were unchanged and seven rose. Turnover was $172.1 million.

The index has now fallen 10.5% from its all-time high of 7571.10 on September 7. A fall of 10% or more is regarded as a correction.

"We were the worst market in the world in October, down 5.4%, but we're still up 10% for the year – probably the only thing that gets close is the FTSE but only in its own dollar terms," said David Price, a broker at Forsyth Barr. "We're still a strong performer, we've just had a rough six weeks. The market itself certainly needed the correction, it's basically only gone one way for a very long time and the valuation had become very stretched. In some stocks, there isn't the support for the price movements that we've had."

Metro Performance Glass led the index lower, down 3.8% to $2.05. Sky Network Television dropped 3.6% to $4.34, while Metlifecare dropped 2.9% to $5.45.

Scales Corp was the best performer on the index, up 3.2% to $3.20. It has agreed to buy Hawke's Bay apple grower, packer, and marketer Longview Group Holdings for $20.5 million, adding capacity to sell fruit into the fast-growing Asian market. The deal will immediately lift earnings per share 4% in the 2017 financial year. Scales has previously forecast 2016 net profit to be between $29.6 million, or 21.1c share, and $34.6 million, or 24.8c.

Xero gained 2.1% to $17.25. The cloud-based accounting software firm narrowed its first-half loss for 2016 as revenue lifted 48%, with its cash burn continuing to slow. Xero said its financial performance was impacted by the costs of transitioning from Rackspace to Amazon Web Services.

"Xero had been pretty weak against the market for the last few days, so it's taking back some of those losses. They've run their course for today on the upside, which is a bit of a surprise, the result was slightly on the disappointing side."

Mercury NZ fell 0.3% to $3. The electricity generator and distributor, formerly known as MightyRiverPower, raised its 2017 earnings before interest, tax, depreciation, amortisation and fair-value adjustments by $5 million to $495 million to reflect additional hydro generation expected from dams in the Waikato catchment.

ANZ New Zealand dropped 0.3% to $28.60. The local unit of Australia & New Zealand Banking Group posted a 9% fall in annual earnings as its margins got squeezed by more expensive funding and stiff competition for mortgage lending, and as it dealt with more bad debts.

Outside the benchmark index, Briscoe Group rose 0.3% to $3.66. The homewares retailer lifted third-quarter sales 8.4% to $125.6 million after spending more on campaigns to woo customers, putting a squeeze on its margins.

NPT gained 2.9% to 70 cents and Augusta Capital was unchanged at $1.02. The board of listed property investor NPT, which Augusta Capital is attempting to oust, says it is considering other proposals and has asked NZX for guidance on aspects of Augusta's expansion plan for NPT.

(BusinessDesk)