MARKET CLOSE: Shares fall as investors mull gains; Spark, Air NZ drop

New Zealand stocks fell, Spark New Zealand and Air New Zealand declined as investors mulled whether recent gains had made the stocks fully priced. Meridian Energy and Genesis Energy gained as traders were drawn to the relatively high yield of the companies.

The NZX 50 index fell 8.243 points, or 0.2 percent, to 5236.994. Within the index stocks were mixed, 22 fell, 23 rose and five were unchanged. Turnover was $108 million.

Investors are looking for earnings growth to justify the benchmark index's 2.2 percent rise in the September quarter. It outpaced the US Dow Jones Index's 1.3 percent gain, while Australia's S&P/ASX 200 Index declined 1.9 percent and the UK's FTSE Index fell 1.8 percent in the same period.

"On a relative basis New Zealand has performed exceedingly well in the last wee while given the weakness we've seen in Australia, Europe and the US," said David Price, a broker at Forsyth Barr. "We've been saying for a little while that the market has a lot of growth factored into it, and we need to see that come through to support where it currently sits."

Spark, formerly Telecom, which rose to a more than six-year high last month, fell 2.4 percent to $2.905 and has gained 29 percent this year. Air New Zealand, the national carrier, declined 1.3 percent to $1.94 and has gained some 26 percent this year.

Offshore investors have been lured to the local bourse for its relatively high yield while international interest rates remain largely on hold in a bid to stimulate economic recovery. Meanwhile, energy companies have rallied in the lead up to and after the Sept. 20 general election, as it became clear there would be no change in government. Opposition parties had vowed to restructure the sector in a bid to push retail electricity prices down.

Meridian, the state-controlled energy company, was the day's best performer on the benchmark, advancing 3.2 percent to $1.45. Fellow partially-privatised power businesses Genesis climbed 1.3 percent to $1.95 and MightyRiverPower increased 0.4 percent to $2.525. Contact Energy rose 1.4 percent to $5.97.

"It's a market which still yields pretty well on a price to earnings ratio basis. We're not cheap but at the moment if you look at the gentailers the yield on them is pretty good, and that's attractive when you've got interest rates at all-time lows pretty much everywhere," Price said. "Stocks with yields are being relatively well supported."

Fletcher Building, the nation's largest listed company, slipped 0.8 percent to $8.66.

NZX [NZX] was unchanged at $1.23. The volume of trades on the New Zealand stock exchange fell 4 percent to 103,458 in September from the year earlier month, as an increase in debt trades failed to make up for a decline in equity trading.

Outside the benchmark index, Dorchester Pacific [NZX: DPC] was unchanged at 25 cents. The finance company now controls 50 percent of Turners Group NZ, formerly Turners Auctions, triggering the car auction firm to pay shareholders a special 15 cents per share dividend, an incentive to shareholders to accept Dorchester's takeover offer. Turners rose 0.3 percent to $3.12.

Abano Healthcare [NZX: ABA] was unchanged at $7. The Financial Markets Authority has filed civil proceedings against Australian private equity firm Archer Capital and Abano shareholder Peter Hutson, saying the parties should have notified the market of their deal to act together on a prospective takeover bid earlier than they did.

(BusinessDesk)