MARKET CLOSE: Stocks join global sell off; Pacific Edge, Xero drop; Fonterra Fund gains

New Zealand shares fell in a global sell-off as rising geo-political tensions and falling dairy prices took confidence out of the market. Pacific Edge led the decline, paced by Xero. Fonterra Shareholders' Fund rose.

The NZX 50 Index fell 11.936 points, or 0.2 percent, to 5092.227. Within the index, 21 stocks fell, 14 rose, and 15 were unchanged. Turnover was $123.3 million.

Stocks across Asia followed Wall Street lower with Japan's Nikkei 225 Index leading the fall, down 1.3 percent in afternoon trading. Investors were spooked by reports of a Russian troop build-up on the border with Ukraine amid ongoing tensions between the two states. Global dairy product prices slumped to the lowest level since October 2012 in the overnight GlobalDairyTrade auction, taking some of the gloss out of New Zealand's economic recovery.

"We're following the US lower overnight and also weaker markets around Asia this afternoon," said Grant Williamson, director of Hamilton Hindin Greene. "The dairy auction results from this morning show a further decline in commodity pricing has seen our dollar come off a wee bit and seen investors loosing a little bit of confidence that the economic pick-up is not going to be as big as expected."

Momentum stocks were sold off in the loss of confidence. Pacific Edge, the Dunedin-based biotech company, led the benchmark index lower, dropping 6.7 percent to 70 cents. Xero, the cloud-based accounting software firm, declined 4.4 percent to $23.90. Outside the benchmark other growth stocks dropped. IkeGPS fell 3.2 percent to 90 cents, Wynyard Group slipped 1.5 percent to $1.99 and SLI Systems dropped 1.4 percent to $1.38.

Units in Fonterra Shareholders' Fund was the best performer on the benchmark, up 1.6 percent to $6.20. Since the last auction three weeks ago, Fonterra Cooperative Group has slashed its forecast 2015 farmgate milk payout to $6 per kilogram of milk solids from $7/kgMS, citing strong global production, a build-up of inventory in China and falling demand in emerging markets. Falling milk prices create fatter margins for Fonterra, while the fund's units give holders access to Fonterra's dividend stream.

Fonterra's "lower input prices into their manufacturing plants is going to boost their profitability as well," Williamson said.

A2 Milk Co, which exports infant formula to China, rose 1.6 percent to 65 cents. Outside the benchmark index, Synlait Milk, which processes a2 Milk's formula and also exports to China, fell 2.6 percent to $3.35.

Fletcher Building, New Zealand's largest listed company, advanced 0.5 percent to $8.86. Telecom Corp, New Zealand's largest telecommunications provider, was unchanged at $2.845.

Gentrack Group extended its decline, falling 2.7 percent to again close at a record-low of $2.13, below its June $2.40 offer price. The utility and infrastructure software company's shares have fallen 17 percent since it said it would miss 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. Today its chief executive James Docking told BusinessDesk the company's prospectus was the result of thorough due diligence and expert advice, and the subsequent cut to guidance reflected the complex nature of its airport and utility software projects.

"It doesn't go well for investor confidence in the management, but the company has explained it and I suppose we have to take it at face value," Williamson said.

NZX was unchanged at $1.28. The stock market operator said it won't cancel trades in Lyttelton Port Co shares made after the release of a substantial security holder (SSH) notice that included first news of a takeover proposal for the company.

Port Otago sent an SSH notice to the NZX last Friday afternoon that announced it had entered a lock-up agreement for its holding of about 15.5 percent with majority owner Christchurch City Holdings (CCH), which intended to make a full takeover of the listed Lyttleton Port at $3.95 a share. Port Otago gave Lyttleton no advance notice of the plan, which included a special dividend of 20 cents. Lyttelton Port Co fell 0.2 percent to $4.09.

(BusinessDesk)