Bloomberg News

New Zealand, Last Bastion of Stock Gains, Succumbs to Crisis

September 23, 2011

(Updates to add stock movers in seventh paragraph.)

Sept. 23 (Bloomberg) -- New Zealand stocks, the developed world’s best performers this year, erased gains after the nation’s economic growth almost stalled, optimism about employment retreated and the Group of 20 nations warned of “heightened” risks to the global recovery.

The NZX 50, which until today was the only developed market benchmark index to have recorded any gain for the year, fell 0.9 percent, joining a global bear market that has wiped more than $8 trillion from equities in the last two months. Just seven of the 50 stocks on the gauge advanced after gross domestic product rose 0.1 percent in the three months through June from the previous quarter, less than all but one of 15 forecasts in a Bloomberg News survey.

“New Zealand hasn’t been directly exposed to the credit issues in Europe or to U.S. growth issues, but it all catches up in the end, and that’s what we’re seeing now.” said Angus Gluskie, who manages more than $300 million at White Funds Management in Sydney. “New Zealand is a relatively small market with a limited diversity of stocks, so it’s not impossible for it to perform disparately.”

The South Pacific country’s stocks had benefited from strong Asian demand for its exports and rebuilding efforts after a Feb. 22 earthquake killed 181 people in the South Island city of Christchurch. Global markets have tumbled as Europe’s smoldering debt crisis, slowing growth in the U.S. and China’s efforts to tame inflation dent the outlook for earnings.

Fletcher Building Ltd., the country’s largest company by market capitalization, dropped 2.2 percent to NZ$7.29, the biggest drag on the index. Auckland International Airport Ltd. dropped 1.1 percent to NZ$2.26.

Markets Tumbling

New Zealand’s equity benchmark has shed 8.2 percent since its May 20 high as Europe’s failure to contain Greece’s sovereign-debt crisis and the slowing U.S. economy have set markets tumbling across the globe.

Goodman Fielder Ltd., Australia’s largest baker, retailer Pumpkin Patch Ltd., and Rakon Ltd., which supplies crystal oscillators for global positioning systems, were the three biggest decliners this year on the benchmark gauge.

“What we’ve seen in the last couple of months is this become more of a good old-fashioned sell-off focused on fears of a global growth downturn,” said Bernard Doyle, an Auckland- based analyst at Goldman Sachs & Partners New Zealand Ltd. “New Zealand is very much in the mix if that becomes a real issue.”

The country’s markets have derived a “veneer of comfort” because New Zealand isn’t the primary listing place of large financial institutions exposed to global headwinds, Doyle said. New Zealand’s currency rose against the yen for the first time this week as a technical indicator signaled losses were too rapid.

“The only note of caution I’d say about the outperformance of our market so far -- and you’re starting to see it in the currency which is probably a good indicator - is the deeper and longer this crisis goes on, the more we’ll get wrapped up in it,” Doyle said.

The so-called kiwi fell to 77.94 U.S. cents from 78.05 cents after sinking to 77.53 cents yesterday, a level unseen since April 12. The kiwi dropped 0.1 percent to 59.42 yen today. The New Zealand dollar’s 14-day relative strength index versus the yen slid to 22.7 yesterday, below the 30-level that some traders see as a sign an asset’s price may reverse direction after falling too rapidly.

New Zealand’s economy may get a long term boost of up to NZ$1.44 billion ($1.13 billion) from this month’s world rugby tournament, according to a study commissioned by Mastercard Inc.

--With assistance from Masaki Kondo in Singapore. Editors: Nick Gentle, Chris Bourke

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net


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