NZ stocks: 'Off day' sees market slump

New Zealand shares slipped into negative territory today following a lacklustre night in offshore markets.

The NZ50 gross index fell 13.88 points to 1999.44 while the NZSE-40 capital index was 7.96 points lower at 1977.45.

Turnover totalled a miniscule $47 million, less than half yesterday's $100 million.

"It was a bit of an off day today," Forsyth Barr Frater Williams broker Alan Wills said.

Market leader Telecom shed 7c to 472 after reaching near seven-month highs above 480 yesterday. The company said today that it, along with fellow shareholder Optus, would have to prop up its half-owned Southern Cross Cable Network by providing contingent support for its debt.

The pair have provided contingent support to banks for deferred loans up to $US151 million ($NZ273 million).

A cash outlay is only expected if Southern Cross is unable to make new sales and Telecom said Southern Cross had been, and is expected to remain, a highly successful investment.

Power company Contact Energy traded as low as 422 after reporting a disappointing first half profit of $34 million - at the bottom end of analysts' $33 million-$47 million forecast range.

Contact, which generates a quarter of the country's power, said it has been hit by the high wholesale power prices.

The average price paid by Contact for retail purchases was $76.18/MWh - 94 per cent more than the $39.23 MWh paid in the same period last year.

Contact shares closed down 5c at 430.

In other news, financial services giant AMP announced today it plans to retreat from a failed offshore expansion, hiving off its troubled British unit and taking $A2.6 billion ($NZ2.88 billion) in writedowns.

Struggling with hefty losses from its British life insurance unit's exposure to a tumbling FTSE-100 stock index, AMP also said it plans to raise $A1.5 billion from institutional and retail investors to fund the split and pay down debt.

Analysts were mixed as to what benefit the changes would bring.

"It should solve their problems," said Tony Jackson, insurance analyst at Macquarie Equities.

"It's obviously going to crucify the share price in the near term, but it is a value adding proposition."

But ratings agencies Standard & Poor's and Moody's said they may downgrade the company's debt, citing the big writedowns and saying the success of the $A1.5 billion share offering is critical.

Fellow insurer Tower, which has its own financial woes, plunged 11c to 212 having traded as high as 230 ahead of the announcement.

Forsyth Barr's Mr Wills explained AMP's capital raising plans would flood the market, making it difficult for other insurance stocks to raise cash.

Fletcher Building slipped 4c to 331 despite figures out today showing building consents rose 21.7 per cent in March, buoyed by a revived apartment market.

Mr Wills said the figures were historical and economists expect a slowdown in the red-hot housing market this year.

Air New Zealand rose 2c to 45c after the Australian government said today it would push for the nation's competition watchdog to approve a proposed alliance between Qantas Airways Ltd and Air NZ that was initially rejected.

Australian Transport Minister John Anderson said it was a hard time for airlines globally and he was worried Qantas' future would be less secure if the deal with Air NZ was blocked.

In other moves: Tranz Rail was flat at 40c ahead of its third quarter result tomorrow morning; Auckland International Airport dropped 3c to 515; Baycorp Advantage fell 2c to 167; Briscoe Group was down 4c at 190; Fisher and Paykel Appliances rose 5c to 1075; Lion Nathan was up 8c at 630 after its MSCI rating was boosted; Sky City lost 5c to 825; Sky TV was a cent lower at 404; and The Warehouse lost 9c to 551.

Rises narrowly outpaced falls by 42 to 40 among the 127 stocks traded.

- NZPA