MARKET CLOSE: Stocks drop to 3 ½-month low; Summerset, SkyCity decline

 New Zealand stocks extended Friday's decline as global uncertainty weighed on the market, and investors wait for the local earnings season to kick off to justify high valuations. Summerset Group Holdings led the benchmark index lower, paced by SkyCity Entertainment Group.

The NZX 50 Index fell 19.246 points, or 0.4 percent, to 5090.685, the lowest level since mid-April. Within the index, 24 stocks fell, 14 rose and 12 were unchanged. Turnover was $107.4 million.

Stocks across Asia were mixed as investors mull the impact of weaker-than-expected US jobs growth, Portugal's reserve bank taking control of Banco Espirito Santo SA and Argentina defaulting on its foreign currency debt. The global picture added to the growing number of uncertainties facing local traders, who are second-guessing the outcome of New Zealand's general election in September, and ahead of the upcoming earnings season. Investors are looking for increased company profits to justify the benchmark index's 7.4 percent gain since the start of the year.

Investors are holding off from buying shares for "a number of reasons globally, and locally the elections are a good reason to wait because it is one extra uncertainty," said Byron Burke, head of equities at Craigs Investment Partners. "The upward trend of this year hasn't been reversed yet - the index is at the bottom of its range and I think earnings season is going to give us that direction."

Summerset led the NZX 50 lower, dropping 3.9 percent to an 11-month low $2.99. The retirement village operator is due to report relatively flat first-half earnings next Tuesday, according to an earnings preview by Forsyth Barr. SkyCity declined 1.9 percent to $3.69. The casino operator reports annual earnings next Wednesday, which are expected to be lower than the a year earlier due to a strong New Zealand dollar, the Forsyth Barr report said.

Trade Me Group fell 1.7 percent to $3.41. The online auction site is expected to report weaker annual earnings later this month as it continues to chase sales growth in its online classified business.

Kathmandu Holdings extended its gains, advancing 1.5 percent to $3.42. The outdoor goods retailer last week said earnings before interest and tax was between $62.5 million and $65.5 million in the year ended July 31, from $63.4 million the year earlier, an improvement from the company's expectation on June 24 that Ebit would likely fall 10 to 15 percent. It doesn't report until September.

Fletcher Building, New Zealand's largest listed company, fell 1 percent to a month-low $8.82. Auckland International Airport slipped 0.4 percent to $3.77. Telecom Corp, which is due to rebrand as 'Spark' on Friday, rose 1.2 percent to $2.87.

Craigs' Burke said investors are cooling their heels after eight new listings, and ahead of two more next week, which take the analysts' time and causes investors to re-weight their portfolios, potentially setting aside cash for new companies coming onto the bourse. Vista Group International and ERoad debut on the bourse next week.

Outside the benchmark index, Gentrack Group extended Friday's drop, falling 1.3 percent to a record-low $2.21, below its June $2.40 offer price. The utility and infrastructure software company's shares slumped about 13 percent on Friday after announcing it would miss its forecast profit by as much as 32 percent from the $3.7 million expected in its May prospectus, barely a month after it raised $99 million in an initial public offer.

"It's very frustrating that this has happened and there is a research blackout still," said Matthew Goodson, managing director at Salt Funds Management, which took a small stake in Gentrack. "It's really quite unsatisfactory when a company is listed like this, it's trading and investors are really groping around in the dark."

Serko, which debuted on the NZX the day before Gentrack, fell 2 percent to 92 cents, below its $1.10 offer price.

Scales Corp, the fruit exporter which debuted last month, fell 0.6 percent to $1.57, below its IPO price of $1.60. IkeGPS Group fell 4 percent to 95 cents, below its $1.10 sale price. Last week's new entrant to the NZX, Metro Performance Glass, rose 0.6 percent to $1.76, above its $1.70 offer price.

Allied Farmers jumped 11 percent to 5 cents, after the company, which is rebuilding from a disastrous takeover of the Hanover and United Finance loan books, said it plans to repay $2 million to Crown Asset Management Ltd by selling down its stake in a subsidiary company and issuing bonds, satisfying its debt to the government entity.

(BusinessDesk)