1.30pm
Shares in Telecom, New Zealand's largest listed company, today slumped to their lowest level in 13 months, dragging the overall sharemarket to a similar low.
The stock, which has a 22 per cent weighting in the top 40 index, dropped 11 cents to $4.52 today.
Following a 12 cent fall yesterday
the stock is down nearly 5 per cent over two days and 8 per cent for the year.
The NZSE-40 capital index earlier touched 1,922.50 -- its lowest level since the end of October 2001.
"The market certainly has a negative feel about it, Telecom is dragging it down," JB Were broker Peter Stokes said.
"There's just some comments in the press about the health of its Australian operations."
Australian telecoms analyst Paul Budde, who has been visiting New Zealand, said the company should sell its Australian subsidiary AAPT as it could only prosper if it shrank further and focused on one or two markets only. Telecom paid over $2 billion for AAPT but has written nearly half of that off.
Brokers are also concerned that the telecommunications market in New Zealand is becoming more regulated and noted that Telecom was suffering a hangover from last week's buying related to changes to the Morgan Stanley Capital International NZ index.
Forsyth Barr Frater Williams broker Richard Burton said the top 40 index was struggling because of Telecom's hefty weighting and its poor performance.
"The problem for the index is it is dominated by Telecom," he said.
Telecom was being sold because of the overhang of the shares placed by Verizon earlier this year, the fact that telcos were out of favour generally and that Telecom was being undermined by the Telecommunications Commissioner opening up the phone market, he said.
Analysts' valuations on Telecom were between $4.50 and $5.50 but no one was increasing those, Mr Burton said.
Other stocks such as Fletcher Building, Hellaby's and Cavalier were producing good profits and dividends and were more favoured by investors.
"Telecom seems to be getting a lot of bad press at the moment," Mr Burton said.
Some investors were selling Telecom stock in readiness for the purchase of quarter of Auckland Airport, which the Auckland City Council was contemplating this week, he added.
- NZPA
