MARKET CLOSE: Stocks fall in sea of red; Xero, Pacific Edge, A2 plunge

New Zealand shares dropped the most in four years in a global sell off after weak Chinese manufacturing data added to concern about the world's second-largest economy and sapped risk appetite. Xero plunged to its lowest level in two years while a weak earnings result saw Chorus hammered.

The S&P/NZX 50 Index declined 143.87 points, or 2.5 percent, to 5607.32, its lowest level since January. Within the index, every stock bar Spark New Zealand dropped. Turnover was above average at $190 million.

Markets across Asia were a sea of red, with Shanghai's Composite Index down 8.6 percent in afternoon trading, Australia's S&P/ASX 200 Index slumped 3.6 percent, while Japan's Nikkei 225 Index tumbled 4.1 percent. Negative investor sentiment was sparked last week by the release in China of the Purchasing Managers' Index from Caixin Media and Markit Economics, which fell to 47.1 in August, from 47.8 in July and below the median estimate of 48.2 in a Bloomberg survey. China is New Zealand's biggest trading partner and the largest export market for Australia's raw materials.

"It's one of those things - stocks go up in escalators and come down in elevators," said James Smalley, director at Hamilton Hindin Greene. "The question is now was is the People's Bank of China going to start pulling the trigger on stimulus?"

Momentum stocks dropped, led by Xero, the cloud-based accounting software firm, led the benchmark index lower, down 8.1 percent to $13.80. A2 Milk, the milk marketing company, declined 5.5 percent to 69 cents. Pacific Edge, the biotech firm, fell 3.3 percent to 59 cents.

"There's no anchor or earnings to link the share price or support it, it all just comes down to perception," Smalley said. "In an environment like this, where everyone is unbelievably, overly negative, or investors are at the moment, then those are the stocks that are a lot more susceptible to negative sentiment.

"Once sentiment really gets hold that can last quite a long time," Smalley said.

Spark New Zealand, formerly Telecom Corp, rose 0.5 percent to $3.035, as investors flocked to the telecommunication provider, which produced an unexpectedly strong dividend forecast at last week's profit announcement.

Property investors and other defensive stocks fell to a lesser degree, Smalley said. DNZ Property Fund slipped 0.5 percent to $2.15. Z Energy declined 0.4 percent to $5.75. Property For Industry fell 1 percent to $1.52. Precinct Properties New Zealand retreated 0.9 percent to $1.155.

Chorus shares fell 4.6 percent to a six-and-a-half month low of $2.625 after the telecommunications network operator reported a 39 percent decline in annual profit to $91 million as the lower regulated price for its copper-based services generated weaker revenue. Weaker earnings are anticipated in the 2016 financial year.

Auckland International Airport declined 4.2 percent to $4.99. The country's biggest gateway beat its own guidance with a 3.8 percent gain in underlying annual earnings and said profit on that measure may rise as much as 8.3 percent in 2016. Underlying profit, which excludes some revaluations of property and derivatives, rose to $176.4 million in the 12 months ended June 30, from $169.9 million a year earlier, while sales rose 6.9 percent to $508.5 million.

On the New Zealand Alternative Index, GeoOp, the workforce management app developer, rose 4.7 percent to 45 cents after it said it will raise $2.4 million in private placement to foreign investors, senior management and the board to help fund the company's expansion in Australia.

(BusinessDesk)