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MARKET CLOSE: Shares slip as earnings growth questioned; Warehouse falls

Suze Metherell
Tue, 07 Oct 2014

New Zealand stocks fell, paced by Kathamndu Holdings and Warehouse Group, as investors mulled the prospect of future earnings growth for domestic companies.

The NZX 50 Index fell 5.606 points, or 0.1 percent, to 5235.708. Within the index, 27 stocks declined, 13 rose and 10 were unchanged. Turnover was $99.1 million.

Investors are looking to the prospect of future earnings to justify an 11 percent gain on the benchmark index since the start of the year, which has posted new records throughout 2014.

"We've had a couple of years of pretty strong, 20 percent-plus, returns," said Craig Stent, fund manager at Harbour Asset Management. "Investors can't expect that to go on forever, so there will be more caution in absolute levels of returns. Clearly the New Zealand market is fairly fully priced in terms of valuations, so for share prices to push on any further, you really need to see some earnings growth come through in the broader market."

Retail is one sector which is struggling to produce earnings growth, particularly those in the rag trade, as mature businesses compete against offshore, online retailers who are luring bargain hunters with cheaper products.

Kathmandu, the outdoor goods retailer, declined 1 percent to $2.96. Warehouse, New Zealand's largest listed retailer, fell 1.6 percent to $3.07. Trade Me Group, the online auction website, slipped 0.3 percent to $3.60. Outside the benchmark index, Hallenstein Glasson, the clothing chain, dropped 1.5 percent to $3.20. Pumpkin Patch, the childrenswear retailer in the middle of a company wide review to return to profitability, slid 4.8 percent to 40 cents.

Across the Tasman, Australia's S&P/ASX 200 Index dropped 0.6 percent in afternoon trading which flowed through to dual-listed businesses here, Stent said.

Australia and New Zealand Banking Group dropped 1.1 percent to $34.80. Westpac Banking Corp declined 1 percent to $36.00. Casino operator SkyCity Entertainment Group fell 1.1 percent to $3.60.

Sky Network Television led the benchmark index lower, dropping 1.9 percent to $6.13.

Spark New Zealand, formerly Telecom Corp, was the best performer on the day, advancing 2.3 percent to $2.95. Fletcher Building, New Zealand's largest listed company, rose 0.1 percent to $8.61.

Chorus fell 1.1 percent to $1.83. The telecommunications network operator said it is seeing growth in its high-speed fixed line connections as it continues to roll out the bulk of the government-sponsored ultrafast broadband fibre network, and is talking up the value of its lines as it tries to deflate the threat of price regulation. The Wellington-based company added 6,000 fixed line connections in the three months ended Sept. 30 taking its total to 1.78 million, with 15,000 more broadband connections for a total of 1.18 million.

On the NZX Alternative Index, Pushpay Holdings rose 9.5 percent to $2.30 after the mobile payment app developer said it signed a deal with New Zealand Post Group to manage its SMS communications with clients through Pushpay subsidiary, Run The Red.


Suze Metherell
Tue, 07 Oct 2014
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MARKET CLOSE: Shares slip as earnings growth questioned; Warehouse falls