MARKET CLOSE: NZ shares fall, led by Contact, Xero; Trade Me gains

New Zealand shares fell after Contact Energy said it doesn't expect growth in operating earnings this year and investors continued to punish Xero after key executives sold down their holdings.

The S&P/NZX 50 index dropped 30.4 points, or 0.5 percent, to 6064.42. Within the index, 24 stocks rose, 19 fell and 7 were unchanged. Turnover was $133 million.

Contact Energy led the index lower, falling 6 percent to $4.70, a 22-month low. The electricity generator and retailer said its operational performance for November was worse than expected, leading it to warn that full-year operating earnings are not expected to be much different from last year's. The company still expects an increase in operating cash flow for financial year 2016.

"You would hope it's only a temporary thing," said Grant Williamson, director at Hamilton Hindin Greene. "The electricity market does go through ups and downs. Lower customer numbers are certainly not helping very much, but they're still talking about some very good cash flows so it looks like dividends will be fine for shareholders."

Xero dropped 3.6 percent to $18.27. The cloud-based accounting software developer has dipped as low as $13.30 and risen as high as $21.90 in the past three months. Prices have fallen since the founder and directors sold 2.5 million shares between them. It has gained 17.3 percent so far this year, as it continues its cash burn with growth as its primary target ahead of profit. Today, Xero announced the introduction of two-factor authentication which increases account security after a small number of Xero clients had to reset passwords in October after their account security was compromised.

"It creates a bit of nervousness in investors minds when that sort of stuff gets in the media," Williamson said. "Management profit-taking doesn't create too much confidence either."

Trade Me Group rose 2 percent to $4, back to the high it hit last week which it had previously reached in November 2014. The stock has risen 7.4 percent this year.

Retirement village owner Summerset Group Holdings rose 1.5 percent to $3.96 and rival Ryman healthcare rose 1.4 percent to $8.20.

"The retirement village sector is viewed as relatively defensive and a good growth sector" and may have gained ahead of the Reserve Bank's review of interest rates this week, which is expected to result in a cut to the official cash rate, Williamson said. "Leading into Thursday we might see a bit of volatility, there's a bit of a question mark which doesn't help the market."

(BusinessDesk)