MARKET CLOSE - NZX50 falls to two-month low as Chorus drops further
New Zealand shares fell, dragging the benchmark NZX50 to a two-month low, as investors cut their holdings in Chorus and other stocks that may face regulatory risk.
The NZX 50 dropped 6.426 points, or 0.1 percent, to 4713.523, the lowest close since Oct. 9. Within the index, 24 stocks fell, 19 rose and seven were unchanged. Turnover was $141.6 million.
Chorus, the network operator spun out of Telecom in 2011, touched a new intraday low of $1.275, and closed down 4.4 percent to $1.32. The stock was the worst performer on the benchmark today.
Chorus shares have plumbed new lows after Telecommunications Commissioner Stephen Gale last month ruled the wholesale price Chorus can charge for its copper-based broadband services should be cut by 23 percent. Chorus, which is challenging the pricing cut, has said it would force an overhaul of its capital structure as its earnings may be slashed by $142 million a year meaning it may not pay its forecast dividends in 2014.
"There's still a lot of uncertainty on the Chorus situation," said Grant Williamson, a director at Hamilton Hindin Greene. "There's still plenty of selling in that stock. Investors just want to get out and remove that uncertainty from their portfolios. Until there is a bit more certainty back into this whole situation we are not expecting any major bounce in the share price and it is likely to stay a seller's market."
Bank of New York Mellon Corp, which has US$1.5 trillion of assets under management, has reduced its holding in Chorus to 6.3 percent from 7.45 percent, according to a substantial security holder notice posted on the NZX today.
The NZX50 has dropped 4.2 percent the past month after rising to a record.
"The market had a great run up this year so there was always going to be a correction at some stage," Williamson said. "That correction has been brought on by the woes of Chorus and other stocks that could be regulated. Investors are deciding to lighten their exposure to those situations. It has put pressure on the market."
Still, Williamson said the correction was healthy as it brought value back to the market for investors.
In other stock news, SkyCity Entertainment Group, New Zealand's only listed casino operator, advanced 1.6 percent to $3.88. The company will be added to Australia's S&P/ASX 200 Index at the close of trading on Dec. 20 following a quarterly review, meaning investors who track the index must buy the stock.
OceanaGold Corp., which will be removed from the index, slipped 2.7 percent to $1.81, making it the second-worst performer on the benchmark today behind Chorus.
Kathmandu Holdings gained 1.5 percent to $3.49 after the outdoor equipment and clothing retailer also confirmed its inclusion in the Australian index, replacing Linc Energy.
NZAX-listed Chatham Rock Phosphate surged 14 percent to 32 cents after the company said it has been granted a 20-year mining permit to extract phosphate nodules from an 820 square kilometre area of the Chatham Rise, the first key step in its approvals to strip the sea floor of the fertiliser chemical.
Delegat's Group gained 0.8 percent to $3.73. The winemaker, which this year bought Australia's Barossa Valley Estate brand, said yesterday it expects operating profit to rise by about 10 percent in 2014, though it warns a high kiwi dollar may hurt earnings.