The value of shares traded on the New Zealand sharemarket today was more than three times normal levels as investors rushed to sell off top stock Telecom.
After the market closed yesterday the Government announced it planned to end Telecom's monopoly of the local loop network.
Today more than 82.4 million Telecom shares, worth more than $415 million, changed hands, compared to the 3.9 million that sold yesterday.
The share price started the day at 555 and got as low as 496, before recovering a little to close at 506, an 8.8 per cent fall on the day.
Telecom shares accounted for all but about $40 million of turnover today which ended with the benchmark NZSX-50 gross index down 73.45 points, or 1.95 per cent, to 3693.21. The NZSX all capital index eased 21.86 points to 1071.32.
A total of about 90.6 million shares were sold, worth $455.5 million, compared to the April daily average of about $135 million.
An NZX spokeswoman said the value of sales today was the highest since September 27, 2002 when Telecom's then cornerstone shareholder Verizon sold all but 1 per cent of its 21.5 per cent stake at a 10 per cent discount.
On that day $1.89 billion worth of Telecom shares changed hands.
Neil Paviour-Smith, head of sharebroking firm Forsyth Barr said the fact Telecom had sold in a reasonably tight band around the $5 mark signalled to him that many investors, including institutions, may have seen the fall in share price as a buying opportunity.
At today's price levels Telecom's dividend yield was strong, approaching 11 per cent or so, and was helping underpin the stock, he said.
"You've got the potential sale of the AAPT stake in Australia which they've signalled may result in a release of capital. Those things are reasonably significant on investors minds.
"I think also there are probably some investors who are looking at the regulatory changes are maybe concluding Telecom, notwithstanding those changes, ... will be able to continue to grow," Mr Paviour-Smith said.
"On the flip side of course you've got the selling from obviously a number of shareholders concerned at the Government's action to regulate."
Large volumes trading today pointed to institutional activity, but the selling was across the board including offshore investors and retail investors.
"There had been some regulatory signals so to some extent the stock price had probably started to factor in some threat of regulation," he said.
"The market clearly didn't expect it to be as pronounced and early as this and hence the reaction now."
He did not see much indication of any other stocks being affected by the Government's decision on Telecom.
"I think the Government's been very, very clear this is about their views on unbundling of the local loop and trying to drive broadband, and they haven't made noises about other sectors."
Goldman Sachs JBWere broker Joe Gallagher said people would be running through their numbers over the next few days to try to get an idea of what Telecom's cash flow profile looked like in the new regulatory environment.
He suspected there would be "some fairly hefty downgrades" in analysts' earnings expectations.
"The numbers are coming down, that's for certain, but it's going to be a fairly difficult exercise just to work out exactly what the cash flow impacts are going to be," Mr Gallagher said.
On the old numbers the dividend yield looked "incredibly attractive" at today's prices.
"But I think there's going to be some question marks on the sustainability of the dividend going forward if Telecom has to deal with increased competition."
- NZPA
<EM>NZ stocks:</EM> Telecom loses 8.8 per cent after unbundling announcment
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