NZ stocks: Telco stocks drag index lower

6.00pm

Telecommunications stocks weighed heavily on the New Zealand sharemarket today, dragging it to a lower close despite a better night offshore.

The benchmark NZSE-40 index lost 12.76 points, or 0.64 per cent, to 1975.95. Heavy turnover of $98 million was dominated by Telecom at $25 million and its Australian rival Telstra at $8 million.

In the United States stocks rose on Wednesday after the Federal Reserve's widely expected decision to stand pat on interest rates soothed investors left jittery by President George W. Bush's tough words on Iraq.

The blue-chip Dow Jones Industrial average rose 21.87 points to 8110.71, having first fallen after the Fed decision. The Standard & Poor's 500 index gained 5.83 points to 864.37. The tech-loaded Nasdaq Composite added 15.93 points to 1358.11.

That failed to rub off locally, however, and brokers suggested the Kiwi bourse could be paying for its relatively better performance in previous sessions.

Telecom, the biggest stock on the top 40 index, fell 5c to 447, while Telstra eased 4c to 483.

Market number two Carter Holt Harvey was steady at 176. Ratings agency Standard & Poor's today left Carter's credit rating unchanged despite a blip in quarterly earnings caused by restructuring at its biggest pulp and paper mill.

Carter Holt yesterday posted a $4 million net profit for the December quarter, down on $25 million the previous year. That fall was offset by a five-fold increase in annual profit to $137 million.

Another stock to report yesterday, Tranz Rail, touched a high of 137 before closing up 2c at 133.

Tranz Rail posted a second quarter operating profit of $18.4 million. The result was consistent with forecasts and chief executive Michael Beard said the company was on track to achieve a full-year operating profit of around $55.8 million.

However, First NZ Capital today downgraded Tranz Rail to market neutral from outperform "given the recent strong appreciation of the share price", and expressed concern about yesterday's result.

"We are less confident of the company's ability to achieve its full year 2003 ebit (earnings before interest and tax) forecast of $53.1 million," First NZ said in a research note.

S&P said after the closing bell that it would keep the rail operator on negative credit watch.

Power company Trustpower closed down 6c at 374. After the close of trade the electricity generator and retailer posted a tax paid operating profit of $39.2 million for the nine months to December, compared with a loss of $1 million a year earlier. Its shares have rallied in recent days on rising electricity prices.

Contact Energy, which has also had a good run recently with prospects of higher power prices, added a further cent to 412.

Wrightson, which yesterday advised it had had better than expected trading in December after a difficult spring, was up a cent at 120.

On the flipside Fletcher Building, which has stretched to fresh highs this month, fell back 5c to 349.

In the retail sector, The Warehouse fell 6c to 710, Hallenstein Glasson fell a cent to 283, Pacific Retail fell 5c to 250, Briscoe Group was steady at 266 and Michael Hill rose 5c to 585.

Falls outnumbered rises by 58 to 29 among the 139 stocks traded.

- NZPA