Article – BusinessDesk
Feb. 22 (BusinessDesk) New Zealand equities stormed past 2,200 on the NZX50 Index, recovering ground lost since mid-January despite a mixed first full week of corporate earnings as Telecom Corp became the latest big corporate to announce big job cuts.
MARKET CLOSE: Investors like Telecom, Contact Energy job cuts; more to come
By Pattrick Smellie
Feb. 22 (BusinessDesk) – New Zealand equities stormed past 2,200 on the NZX50 Index, recovering ground lost since mid-January despite a mixed first full week of corporate earnings as Telecom Corp became the latest big corporate to announce big job cuts.
The NZX50 index of leading stocks rose 44.175 points, or 1.059 percent to 4,214.603, a level not seen since Jan 18, when there was a surge of pre-earnings season optimism about earnings quality. Total turnover was unusually heavy at $200.5 million, at the end of the biggest week of the mid-year earnings season.
Within the index, 26 stocks rose, 17 fell and seven were unchanged.
Pre-season optimism had looked in danger of being snuffed out this week as leading stocks either disappointed or only just made earnings guidance.
However, announcements of job cuts in both New Zealand and Australia by heavyweights such as Fletcher Building gave investors heart that senior managers had strategies to deal with sub-par earnings in the weak New Zealand economy.
Fletcher, Telecom and Contact Energy, together worth 26.3 percent of the NZX50, all rose after announcing hundreds of job cuts along with barely adequate earnings, as institutional investors saw evidence of companies with plans to improve earnings.
“We’ve got more to go. We’ve just started the process,” said Shane Solly at Mint Asset Management. “We’ve been concerned that there’s been a bit of phony war going on” in New Zealand, with large employers delaying lay-offs until signs of an improving economy emerged.
A lot of the job losses in coming months would be in middle management, Solly said.
“It’s not the man in the street, it’s their bosses.”
Telecom was the third strongest riser today, up 3.85 percent to $2.29. After taking a pummeling earlier in the week and earning a “reduce weighting” call from analysts Morningstar, Fletcher rallied 1.52 percent today to close at $8.68. Chief executive Simon Moutter foreshadowed a “fair, fast and fearless” restructuring in the next 10 months to refocus the company to mobile and data services.
Contact, at 4.3 percent of the NZX50, surged during the trading day, although it finished only 1.73 percent up for the week after reporting solid half year earnings and a plan to cut 10 percent of its staff of 1,100.
Fletcher, which has bigger problems in Australia than New Zealand where Auckland activity and the Christchurch rebuild are raising demand, closed the week up
However, leading the index higher on surging world gold prices was Oceana Gold, spiking 8.05 percent to $2.82, while New Zealand big shed retailer Warehouse Group also made a strong showing, up 4.17 percent to $3.50.
AMP earnings announced to the ASX this morning disappointed the market, and saw the stock lead fallers on the index, 3.11 percent to $6.55.