Prices slip as investors head for the sidelines

Share prices slipped again yesterday as investors took to the sidelines before the election, with a looming battle between Fletcher Building and Western Australia’s BGC, and a possible bid for Sky TV being the main talking points.

The S&P/NZX50 index closed at 11,265.72, down 26.86 points or 0.24 per cent. Turnover, worth $71.3 million, was again light. There were 66 gains and 57 falls among the 185 stocks traded.

While Fletcher remained in a trading halt, the company mounted a stout defence against claims by the Australian building firm that its Iplex pipes were defective.

Jeremy Sullivan, investment adviser at Hamilton Hindin Greene, said there were some wide estimates of how much the claims would cost.

He said $50m to $100m for an Australia-wide fix had been talked about, adding Fletcher was not likely to be “on the hook” for the total.

Current market pricing suggests that when trading resumes on Monday, Fletcher shares could fall to $4.59 — down 21 cents or 4.3 per cent from its last traded price — a $164m hit to its market capitalisation.

“Our take is that this is likely to result in a lengthy legal battle,” he said. “I would expect that this may drag on for several years and the final costs will not be known for quite some time.”

Shares in Sky TV rallied by 33 cents (13.3 per cent) to $2.80 after the company said it had started engaging with a potential acquirer, although discussions were at a very early stage.

News of the approach to Sky came from an announcement regarding its share buyback. “What that tells me is that Sky, whilst obliged to disclose it, does not feel that it has the legs to go through,” said Sullivan.

In general, investors were holding back before the election at a time when the leads from overseas were mostly negative, such as data from the

US showing inflation was higher than forecast in September, raising the prospect that the Fed may raise interest rates once again.

New Zealand’s latest CPI figure is due on Tuesday. The ANZ expects annual CPI inflation re-accelerated to 6.1 per cent, year-on-year, in the third quarter, slightly above the Reserve Bank’s August forecast of 6.0 per cent.

Several of the big names were weaker.In transport, Auckland International Airport fell 6.5c or 0.8 per cent $7.86 and Freightways dropped 10c (1.18 per cent) to $8.35.

China-exposed a2 Milk was again soft, falling 3c to $4.55. Among the power generators, Contact Energy lost 6c to $8.00, Meridian dropped 9c to $5.11 and Genesis declined 4c at $2.44.