NZ stocks: Wall St tipped to set tone for NZ market

By ELLEN READ and AGENCIES

Analysts were unwilling to speculate on this week's likely gyrations of the New Zealand sharemarket saying the tone would be set by Wall St's continued reaction to the World Trade Center attacks.

There were few who were predicting a sudden surge of strength. Most said instead that a weak Wall St and the prospect of a global economic downturn would be reflected in the local bourse.

The NZSE-40 has fallen sharply since the New York tragedy, dipping 8 per cent and losing several billion dollars in value.

Hard hit have been banking, insurance and tourism stocks and this trend is unlikely to change. Aviation stocks, even discounting the Air New Zealand debacle, are obviously out of favour.

"It will be yet another week of uncertainty and investors appear to be going into the safe havens of defence and health and utilities," Salomon Smith Barney economist Annette Beacher said.

"It's certainly staying away from cyclicals and deep cyclicals and just resting your money with defensives.

"Most people with a medium-term view would hold out as these are buying opportunities. But it takes a very brave person to initiate those sort of investment moves," she said.

US stocks tumbled last week with losses on the Dow Jones now over 1200 points.

About $1.2 trillion in investor wealth has evaporated, raising fears that a drop in consumer spending will add more pressure to the US economy.

It is not all doom and gloom though. Telecom is one of a half-dozen stocks on the New Zealand exchange capable of resisting a recession lasting through next year, according to broking house Credit Suisse First Boston.

In light of the attacks in the United States that left more than 5000 dead or missing and sent share markets around the world plunging, CSFB considered two scenarios.

These were a short recession where equity markets remained weak but showed a decent recovery next year, or a more protracted global recession until perhaps the end of next year.

Telecom, which carries a 22 per cent weighting on the NZSE-40 Capital Index, was among stocks favoured under both scenarios.

The other CSFB picks were Contact Energy, Sky City, Frucor, Fisher & Paykel and Guinness Peat Group.

On the local front, with the reporting season over for another six months, there are few items on the agenda. Bendon holds its annual meeting in Auckland on Wednesday.

Today sees the trading debut of Certified Organics Limited, the first totally organic company on the exchange's main board. Certified Organics was formerly shell company AQL Holdings Limited.

But most eyes will be on Air New Zealand. Will the board meeting early this week be able to push ahead with the rescue package? Or will statutory management be the only answer?