MARKET CLOSE: Shares fall in global slump; Xero, Pacific Edge drop on nerves

New Zealand shares fell in a region-wide sell off as investors fretted over global economic growth. Tech-based stocks like Xero and Pacific Edge led the decline as the market took a more cautious tone.

The NZX 50 Index fell 40.898 points, or 0.8 percent, to 5225.139. Within the index, 33 stocks fell, 11 rose and six were unchanged. Turnover was $103.8 million.

Markets across Asia followed Wall Street lower on fears global economic growth was stalling, as poor economic data out of Germany stokes concern Europe may slip back into recession. Earlier in the 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. Australia's S&P/ASX 200 Index slumped 1.7 percent in afternoon trading, Japan's Nikkei 225 Index dropped 1 percent and Hong Kong's Hang Seng Index slid 1.5 percent.

"Markets have had a great run, so we're looking expensive and due for a correction," said Mark Lister, head of private wealth research at Craigs Investment Partners. "People are seeing some pretty terrible economic data coming out of Europe that is increasing the risks of Europe slipping back into recession, and then you have all the geopolitical turmoil, which is what is happening in the Middle East, Ukraine is still not resolved, and Ebola."

Tech-based stocks were sold off in the risk-averse market. Xero, which is forgoing profit as it chases growth, led the benchmark index lower dropping 8.6 percent to $19.15, the first time the cloud-based accounting software firm has traded below $20 in a year. Pacific Edge, the Dunedin-based biotech company, declined 3.2 percent to 90 cents. Diligent Board Member Services, the governance app developer, fell 2 percent to $4.43. Outside the benchmark index, SLI Systems, the search engine software firm, slipped 3.5 percent to $1.11. Wynyard Group, the security software developers, decreased 0.9 percent to $2.11.

"There is a behavioural aspect to markets, when people start to get nervous and they want to take some risk off the table the first stocks they sell are the higher risk ones that are more exposed," Lister said. "You're seeing the higher risk companies get sold down and the safer more steady, all of those more safe predictable businesses are the ones doing well."

Energy companies made up the benchmark index's few gainers today. Meridian Energy advanced 3 percent to $1.54. MightyRiverPower rose 1.9 percent to $2.64. Contact Energy gained 1.2 percent to $6.03.

Fletcher Building, New Zealand's largest listed company, fell 1.7 percent to $8.72. Spark New Zealand, formerly Telecom Corp, declined 0.5 percent to $2.895.

Tower fell 0.8 percent to $1.98. The insurer, which sold its health, life and investment units to focus on general insurance, said chief financial officer Michael Boggs will leave in the first quarter of 2015. Boggs will become CFO at NZME, the media company which owns The New Zealand Herald, The Radio Network and GrabOne and is planning to list on the NZX before the end of the year.

Outside of the benchmark index, Michael Hill International, the jewellery chain that bears the name of its founder, rose 0.8 percent to $1.28. The Brisbane-based jeweller said same store sales rose 0.3 percent to A$96.2 million in the three months ended Sept. 30, from the same period a year earlier, as Australian sales declined in the less buoyant economic environment across the Tasman.

Green Cross Health [NZX: GXH], formerly Pharmacybrands, fell 1.6 percent to $1.80 after it announced it has bought medical centre operator Peak Primary, which was in breach of its banking covenants in 2013, as it continues its expansion across the primary health sector. It didn't disclose the purchase price.

(BusinessDesk)