Market close: shares at two-month low - Telecom, Hallenstein slide

New Zealand shares fell, pushing the NZX 50 Index to a two-month low amid concern equity markets worldwide have surged ahead of earnings potential. Hallenstein Glasson Holdings led the decline after a profit warning, while Telecom and Fletcher Building paced the slide.

The NZX 50 fell 43.74 points, or 1 percent, to 4398.39, the lowest since early April. Within the index, 33 stocks fell, 15 rose and two were unchanged. Turnover was $165 million.

Stocks fell across Asia as doubts about the pace of global growth were reinforced by the World Bank cutting its global outlook and a slump in Japanese stocks, pushing the Nikkei 225 Index down 5.6 percent as the yen rallied.

Hallenstein fell 7.5 percent to a seven-month low of $4.95 after the clothing chain said full-year profit may drop as much as 12 percent because of a slow start to winter and intense rivalry hurt returns from its Glasson stores in Australia.

Among other retailers, Warehouse Group fell 2.4 percent to $3.67, Pumpkin Patch slid 1.9 percent to $1.04, Michael Hill International dropped 1.5 percent to $1.30 and Kathmandu slipped 0.4 percent to $2.62.

"In a lot of countries we've not had the earnings growth to substantiate the appreciation of the assets," says David Price, a broker at Forsyth Barr. His firm has been making more downgrades than upgrades for companies in recent weeks in what had become an "expensive" market.

He says it is only the fourth time since the early 1990s that the New Zealand market had traded at a multiple of 16 times earnings.

Fletcher, the construction and building products company, fell 1.6 percent to $8.14 and Telecom declined 3.6 percent to $2.16. Fonterra Shareholders' Fund fell 0.4 percent to $7.25.

Pyne Gould Corp jumped 15 percent to 30 cents after the financial services firm controlled by George Kerr said annual profit will be $30 million in the year ending June 30 after gains from asset sales.

Bathurst Resources was unchanged at 19.5 cents after shareholders approved the re-domicile of the company to New Zealand, where its existing and prospective mining operations are based.

Mighty River Power slid 3.4 percent to $2.26, a new low, after the value of Tiwai Pt smelter, which uses about a seventh of the country's electricity, was written down to almost zero. The smelter's majority owners Rio Tinto are trying to renegotiate the terms of its contract with state-owned Meridian Energy.

If the smelter shuts, Meridian says it could sell the same energy at better margins and would displace more expensive electricity generating competitors. The massive generation overhang created by a wind-down at the smelter would be a major risk factor for investors to consider.

Contact Energy rose 0.2 percent to $5.01 and TrustPower fell 0.3 percent to $7.24.

Air New Zealand dropped 3 percent to $1.48 after the High Court ratified a $7.5 million penalty for its role in fixing prices on air cargo fuel and security surcharges. The airline spent $10 million defending the case, and was the last to admit liability.

Heartland New Zealand fell 1.2 percent to 81 cents after the Reserve Bank kept the key interest rate on hold at 2.5 percent, while reiterating its concerns about the heating property market.

The central bank is considering imposing increased capital buffers or restricting high loan-to-value ratio lending in a bid to cool a heating property market.

SLI Systems sank 5 percent to $1.91, the lowest close since its $1.78 debut on May 31. The online search engine maker raised about $27 million in an initial public offer, selling shares at $1.50 apiece.

(BusinessDesk)