New Zealand shares fell, extending the S&P/NZX 50 index's correction from a record high on September 7, as investors fretted that valuations weren't supported by earnings growth. Trade Me, Fletcher Building and Metro Performance Glass led the decline, while Abano Healthcare jumped after a takeover approach.
The S&P/NZX 50 index fell 70.46 points, or 1 per cent, to 6708.47. Within the index, 36 stocks declined, 10 rose and five were unchanged. Turnover was $105 million.
Offshore investment in the New Zealand market reached a record high at the end of September, according to Forsyth Barr. The index has now fallen 11.3 per cent from its all-time high of 7571.10 on September 7. A fall of 10 per cent or more is regarded as a correction. Ahead of the US presidential election next week, the Chicago Board Options Exchange Volatility Index, or VIX, known as Wall Street's fear gauge, has risen to a five-month high as financial markets have become unnerved by the close-run campaigns for the White House.
Trade Me, the auction website, fell 3 per cent to $4.47 and Fletcher declined 2.8 per cent to $9.72. Tegel Group Holdings fell 2.7 per cent to $1.46 and MetroGlass dropped 2.4 per cent to $2.
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David Price, a broker at Forsyth Barr, said the average price-to-earnings ratio for companies on the NZX 50 has retreated to about 18 times from a P/E "of 20-plus" but there hasn't been panic selling. The P/E has averaged 17 in the past five years.
"We were bloody expensive and now we're just expensive," Price said. The New Zealand market has been "an absolute superstar" but much of that was driven by momentum buying rather than valuation support, he said. "We've got some offshore concerns. The election is making people think."
SkyCity fell 2.4 per cent to $3.62 and Air NZ fell 1.6 per cent to $1.87.
Abano jumped 14 per cent to $9, with the group's dissident shareholders, Anya and Peter Hutson and James Reeves, seeking control of the dental clinic and radiology operator in a partial takeover offer. They are seeking to raise their holdings to 50.01 per cent by buying 6.65 million shares at $10 apiece.
Spark New Zealand fell 1.4 per cent to $3.415 as the telephone company told shareholders at its annual meeting that it wants to steer customers away from Chorus' copper lines, which it said weren't as reliable for broadband services. Chorus gained 0.9 per cent to $3.57.
Gentrack Group rose 2.6 per cent to $3.50 after saying annual earnings rose 16 per cent.
Stride Property fell 2.1 per cent to $1.84, the biggest decliner among property companies.