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NZ sharemarket disappoints as Telecom falls to all-time low

Telecom shares fell to a new all-time low today, making it difficult for the New Zealand sharemarket to keep up with other markets.The benchmark NZX-50 index closed down 6.837 points, or 0.2%, at 3200.959. Turnover was worth $94.98 million. There were 34

NZPA
Wed, 17 Mar 2010

Telecom shares fell to a new all-time low today, making it difficult for the New Zealand sharemarket to keep up with other markets.

The benchmark NZX-50 index closed down 6.837 points, or 0.2%, at 3200.959. Turnover was worth $94.98 million. There were 34 rises and 45 falls among the 116 stocks traded.

"It is a disappointing performance because the offshore markets were firmer. We've given up ground and it is mainly due to Telecom," said Grant Williamson, director at Hamilton, Hindin, Greene.

Telecom closed down 3c at $2.14 and traded as low as $2.13 today. About $20.66 million worth of its shares changed hands.

Mr Williamson said there was continued selling, particularly by retail investors, after Telecom said yesterday that reform of the Telecommunications Service Obligation would cost it up to $56 million in earnings a year for 2011-13.

Investors were worried that the reduced earnings would lead to a cut in dividend payment and they could not see a growth story for the stock for the next three years.

Mr Williamson said there was some switching out of Telecom and into other high yield utilities such as Vector, which rose 2c to $2.09.

James Lee, head of institutional equities at First NZ Capital, said an earnings downgrade was never good for a stock and "pushed out the earnings recovery story."

The company has been paying annual dividends of 24c a share and its earnings for 2011 are only expected to be 20c a share.

His firm's valuation of Telecom was around $2.40 but given the risks buyers may be around the low 200 mark.

Fund managers commented off the record that valuation of the stock was difficult due to the uncertainties surrounding it.

Infratil rose 2c to $1.69. Contact Energy fell 7c to $5.99, though brokers said there was little new in an operating update it put out today.

NZX fell 3c to $1.95 even though it said it was working on developing an electricity hedge market. Fletcher Building rose 1c to $8.13.

Ebos rose 5c to $6.30, Cavalier Carpets fell 5c to $2.80 and Nuplex rose 3c to $3.35. NZ Refining rose 3c to $3.64 after reporting improved refining margins earlier this week.

NZPA
Wed, 17 Mar 2010
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NZ sharemarket disappoints as Telecom falls to all-time low
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