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MARKET CLOSE: Shares fall in global sell-off; Xero, Fletcher drop

Suze Metherell
Thu, 16 Oct 2014

New Zealand shares fell, led by Xero, joining a worldwide sell-off as investors fretted over stalling global growth. Fletcher Building, Kathmandu Holdings declined as the local currency gained against its Australian counterpart.

The NZX 50 Index fell 30.852 points, or 0.6 percent, to 5132.02. Within the index, 34 shares fell, eight rose and eight were unchanged. Turnover was $145 million.

Overnight, Wall Street dropped as reports showed declines in US retail sales and producer prices fuelled concern about the pace of the global economy. Last week, the International Monetary Fund cut its global growth forecast for 2015 to 3.8 percent from 4 percent and warned geopolitical tensions posed a risk to "frothy" equity markets. Markets across Asia retreated, with Japan's Nikkei 225 Index falling 1.8 percent in afternoon trading, Hong Kong's Hang Seng Index declining 0.6 percent, and Australia's S&P/ASX 500 Index down 0.6 percent.

"The main theme is global growth fears have re-emerged," said Matthew Goodson, managing director at Salt Funds Management. "The evidence for that is fairly spotty, just several different monthly data points out of Germany and the US. We shall have to wait and see whether those fears are actually realised or not. The problem for markets is that they're at unusually high valuation levels so it doesn't take a great deal of bad news or perceived worry to upset that."

Xero, the cloud-based accounting software firm, fell 4.5 percent to a 13-month low of $16.96. The stock has declined some 63 percent from its March peak of $45.99 in part due to a global selloff as investors questioned high valuations relative to earnings of tech companies. The Wellington-based company wants a million customers, and is targeting growth in the US market where so far it has some 22,000 of its total 371,000 customers from.

"The stock is weak, but we are in a market where hope doesn't have a high multiple placed on it," Goodson said. "To get to the multiple where Xero was formerly trading you need several million plus customers in the US, and to date that is a concept rather than a reality."

Stocks with trans-Tasman exposure fell, after the kiwi dollar climbed as high as 91 Australian cents in early morning trading. A high dollar crimps earnings when translated back into local currency. Kathmandu, the outdoor goods retailer which earns more than half of its sales in Australia, fell 1 percent to $2.89. SkyCity Entertainment Group, which operates casinos in Darwin and Adelaide, declined 0.9 percent to $3.47.

Fletcher, New Zealand's largest listed company with Australian operations, dropped 1.6 percent to $8.55. The company said it will close its Christchurch insulation factory, as it consolidates its Tasman Insulations operations in a "highly competitive market".

Chorus, the telecommunications network operator, advanced 0.3 percent to $1.895. The Commerce Commission has suspended an investigation into Chorus's proposed Boost variant services after the operator put plans to constrain regulated services on hold. Spark New Zealand, formerly Telecom Corp which also withdrew a complaint against Chorus, fell 0.4 percent to $2.88.

Of the day's few gainers, state-controlled power company Meridian Energy rose 0.7 percent to $1.55. MightyRiverPower gained 0.8 percent to $2.65. Contact Energy increased 1 percent to $5.94. Genesis Energy was unchanged at $1.895.

On the New Zealand Alternative Index, Pulse Energy, the electricity retailer controlled by lines company Buller Electricity, fell 1.6 percent to 6 cents. It is seeking up to $6 million through a convertible notes offer to sophisticated investors to ensure it has a big enough cash buffer as it continues to grow.

Pushpay Holdings, the mobile payment app developer, was unchanged at $2.35 after it said it has dropped its centralised marketing strategy in favour of subsidiaries targeting their local markets, and as a result appointed Weston Belkot as US marketing director and cut its general manager of marketing position, with executive Fraser Clark to leave the company at the end of the month.


Suze Metherell
Thu, 16 Oct 2014
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MARKET CLOSE: Shares fall in global sell-off; Xero, Fletcher drop