NZ stocks: Capital structure will be hot topic

By ELLEN READ

Two of the country's largest companies face up to shareholders at annual meetings this week.

Between them Fonterra and Telecom have more than 60,000 shareholders (12,000 and more than 52,000 respectively), giving plenty of opportunity for feedback.

Despite Fonterra's being in the middle of a capital structure debate, the subject is not on the agenda for this year's meeting.

But it is bound to be a hot topic for questions as hundreds of cow cockies descend on Palmerston North for the Thursday meeting.

Farmers will also be hoping that Fonterra follows last year's lead and uses the occasion to increase the payout forecast.

Telecom - which also holds its annual meeting on Thursday - has adopted a new approach this year of asking shareholders to submit questions before the gathering.

Although those attending will still have the chance to probe the board and senior management, Telecom chairman Rod Deane has put the call out for early queries, saying the company will try to address as many of the more frequently asked questions as possible.

Unless shareholders come up with some curly questions, the meeting is likely to be a low-key affair. The agenda is tame with just board re-elections, paying the auditors and amending the constitution to fit new NZX rules set down.

The company is returning to Wellington for its meeting, after holding the event in Auckland for the first time last year.

The long-running energy sector saga continues with Powerco shareholders due to receive details of the contentious Prime Infrastructure takeover this week.

It is hoping the bonds it is offering as part payment for Powerco shares will be popular.

As the final quarter of the year kicks off, First NZ Capital strategist Jason Wong is signalling a possible end to local equity outperformance.

In the three months to September 30 New Zealand equities rose 5.1 per cent, outperforming international stocks which fell 0.3 per cent (on a fully hedged basis).

Wong said the outperforming local sectors were investment, capital goods, insurance and healthcare. Not faring so well were stocks in manufacturing, airlines, banking and telecommunication services.

Now, however, slowing growth and tighter monetary policy suggest moderate returns for equities.

"The standard array of models are flashing warning signs for NZ equities, as they have defied global trends, the weaker macro outlook and tighter monetary policy. We wouldn't be surprised if NZ equities turn from an outperforming asset class to an underperforming one," Wong said.