NZ stocks: Market plunges 6 per cent

1.04 pm

The NZSE-40 share index plunged nearly 6 per cent this morning, in the third biggest fall in the market's history.

The index dived 110.77 points by midday, down 5.9 per cent, to 1764.77 -- its lowest level in nearly three years.

The fall was the biggest one-day fall since a 12.5 per cent, 307.58 point, plunge on Monday, October 28, 1997 during the Asian financial crisis. That in turn was the biggest since the 14.7 percent blood-letting in the October 1987 sharemarket crash.

Today's worries centre on the economic fallout of the World Trade Centre disaster with Wall Street due to reopen for the first time in four trading days since the disaster occurred.

Air NZ's tailspin steepened as its stocks plunged another 40-plus per cent this morning on doubts about the airline's financial viability and survival.

"The market is being sold quite aggressively ahead of what is expected to be a difficult Wall Street this evening," said JB Were broker Murray Rutherford.

"It's selling across the board accentuated in the travel stocks," said Forsyth Barr Frater Williams executive director Don Turkington.

"The short-term fear is that Wall Street will be down sharply when it reopens tonight," said Dr Turkington. "The long-term fear is world recession."

There was high anxiety about the US market following steep falls in European markets on Friday.

"It's classic fragility on a Monday. We are getting guidance from nowhere and this is not the sort of market that shows fortitude," Dr Turkington said.

He said some private clients were buying Air NZ shares "taking a punt on its survival".

Asked if there were doubts about the airline's financial viability, Mr Rutherford said: "There is a lot of emotive talk. With the nature of the major shareholders (Singapore Airlines and Brierley Investments) and their intentions to recapitalise the company, I don't think we should be taking too much notice of those kinds of comments."

However, he agreed that to lose another 40 per cent of its value in such short order was worrying. "Absolutely, there is no question about that. It is very worrying."

He said there was no evidence of bargain hunting in general on the market as yet.

"This is a market where extreme caution is necessary."

The Air NZ A shares were down 20c to 31 cents, off their 26 cent low while the freely tradeable B shares were also off 20 cents to 30c but up from their 26c low.

Auckland Airport shares also suffered, with the share price falling 43c to 292 by mid-morning.

Brokers estimated Air NZ provided about half the airport's landing fee revenue but added bargain hunters might also see it as a long-term opportunity.

Brokers said other problems for Air NZ included Friday night's credit rating downgrade by Standard & Poors, a simple reluctance by travellers to fly via the United States, and possible consumer resistance to Air NZ in Australia.

"Even after the announcement of the recapitalisation last week, the company was also still short of equity and in the current environment it's going to be pretty hard to achieve that," said David Price, of Credit Suisse First Boston.

Market leader Telecom was down 24c to 431 -- a seven year low.

Air NZ's 30 per cent owner Brierley Investments plunged 8 cents to 40 cents, an all-time low following the stock's two-for-one consolidation earlier this year. The fall was on light volume.

This year's market darling, Fisher & Paykel fell 42c to 1210. Another darling, Baycorp plunged 220 to 950.

There were only nine stocks to rise while 102 of the 131 stocks traded were down.

Other stocks to fall sharply included Sky City, 65c to 1025, Telstra, 16c to 585, Lion Nathan, 25c to 540, Warehouse, 16c to 576, ANZ, 40 to 1820, Fletcher Forest preference shares, down 3c to 23, Fletcher Building, 21c to 225, and Guiness Peat Group, 10c to 141.

Some stocks which had been difficult to buy were becoming available, Mr Rutherford said.

- NZPA