South Island listed companies took a hit by a recent loss in investor confidence after the previously positive outlook but its economy remains more stable than the rest of the country, according to Deloitte.The latest Deloitte South Island Index decreased
South Island listed companies took a hit by a recent loss in investor confidence after the previously positive outlook but its economy remains more stable than the rest of the country, according to Deloitte.
The latest Deloitte South Island Index decreased $166 million or 3.9% during the second quarter of 2010.
Growth during the six-month period to 31 March 2010 had been wiped out in the latter two months of the June quarter. But compared to the previous year the index market capitalisation of $4,109 million was $385 million higher than at June 2009.
Paul Munro, a corporate finance partner in Deloitte’s Christchurch office, said South Island’s economic stability is due to its main sectors including primary, retail and development, not being as volatile as other sectors that make up the national economy.
“The South Island economy hasn’t had the highs but hasn’t had the lows either – there is some protection there in terms of what South Island economy represents relative to the rest of the country.
“That’s a consistent trend that we’ve seen over the last two to three years through the index. What the data shows over a period of time is that South Island economy is less volatile.”
Capital raising
Hardest hit in the South Island were Kathmandu Holdings (down $86.0 million or 17%), Pyne Gould Corporation down $77.4 million or 21%) and PGG Wrightson (down $53.1 million or 12%).
Companies that had bucked the downward trend this quarter had done it largely through capital raising activity, such as New Zealand Windfarms, which made the largest gains increasing by 108%, and Pike River Coal, while Skyline Enterprises, NZ Wool Services and Skellerup Holdings all experienced increasing share prices.
While the decrease in market capitalisation in the past three months wasn’t as significant as the national trend, with the NZX 50 falling by 9.1% in the same period.
Mr Munro said he doesn’t believe there will be a double-dip recession, but it is likely the recovery will continue to be patchy and will inevitably be influenced by the strength of the global recovery.
“My view is that over the next 6 to 12 months we’ll see some signs of recovery but we may well bounce along the bottom a little bit on a month-to-month or a quarter-to-quarter basis.
“So there will be some good news mixed with some bad news I suspect for the rest of this calendar year,” he said.
In terms of sector movements, the biotechnology and development sectors experienced small growth, following declines in the previous quarter, while the financial services and retails sectors had greater than 15% declines in the June quarter.
