NZ stocks: Prices fall on surprise rate rise

12.30pm

New Zealand share prices fell heavily today on the surprise news that Reserve Bank Governor Alan Bollard lifted the official cash rate by a quarter of a percentage point to 5.25 per cent.

By noon, the benchmark NZSX-50 index fell 34.30 points, or 1.4 per cent, to 2485.62 while the NZSX-40 index was down 30.51 points, or 1.3 per cent, to 2307.66.

Turnover was light at $40.4 million.

Dr Bollard hiked the interest rate in a bid to check the booming domestic economy, particularly the housing market.

Earlier this morning the United States Federal Reserve opted to hold interest rates to keep the US economic recovery rolling, but its indication that a rate hike was looming pushed down Wall St stock prices by a similar margin.

Andrew Kelleher of ASB Securities said a combination of factors had led to weakness across the board today on the New Zealand sharemarket.

"US markets have weakened off substantially at the end of their day," he said.

"Then the RBNZ news was probably a bit of a surprise for the market."

Mr Kelleher said Carter Holt Harvey's result this morning was also slightly disappointing.

"It was a classic case of buy on the rumour and sell on the fact," he said.

CHH's share prices shed 6c to 204 after it announced December year earnings before interest and tax of $315 million, 5 per cent down on 2002. A $876 million write-down of the company's 330,000ha forest estate contributed to the company posting a net loss of $656 million.

Telecom, which has been propping the market up, today fell back 8c to 558.

Others to lose ground included Auckland Airport down 5c to 674, Contact Energy 8c to 562, Fisher & Paykel Appliances 5c to 378, Fisher & Paykel Healthcare 15c to 1215, Lion Nathan 5c to 670 and The Warehouse 10c to 515.

Trustpower fell 10c to 680 despite reporting a 26 per cent improvement in net profit.

Among the 118 stocks traded, 12 rose and 66 fell.

"I think it's important to look beyond daily movements," Mr Kelleher said.

"The NZSX-50 has had a steady upward climb the whole of this year so there we're seeing a correction today."

- NZPA