MARKET CLOSE: NZ shares fall, paced by Fletcher, Air NZ, Fonterra

New Zealand shares fell, paced by Fletcher Building and Air New Zealand, as a global sell off weighed on local stocks. Fonterra Shareholders' Fund extended yesterday's decline after the dairy giant lowered its dividend forecast.

The NZX 50 Index fell 24.614 points, or 0.4 percent, to 5833.168. Within the index, 21 stocks fell, 14 rose and 15 were unchanged. Turnover was $111 million.

Overnight Wall Street fell as weak economic data spooked investors about the recovery of the world's largest economy. Markets across Asia followed suit, with Japan's Nikkei 225 falling 1.3 percent in afternoon trading, while Australia's S-P/ASX 200 slipped 1.1 percent.

Fletcher Building, New Zealand's second-largest listed company, fell 2.1 percent to $8.49. Air New Zealand, the national carrier, dropped 1.8 percent to $2.70. Genesis Energy, the government controlled energy company, declined 2.7 percent to $2.32. Spark New Zealand, formerly Telecom Corp, fell 0.2 percent to $2.97.

"The main thing behind it was the US economy is slowing and consumers are spending less, and as we know the US economy is made up 65 percent of consumer spending," said James Smalley, director at Hamilton Hindin Greene. "The local market is going to be broadly supported by the yield differential between what you can get at the bank and what you can get from dividend paying stocks."

Units of the Fonterra fund, which are entitled to the dividends from the ordinary shares of Fonterra Cooperative Group, declined 1.1 percent to $5.50, extending yesterday's decline of 7.2 percent. The dairy company posted a 16 percent drop in first-half profit to $183 million in the six months to Jan. 31, which it said reflected tough conditions in dairy while also trimming its guidance for dividends to a range of 20 cents to 30 cents, from a previous 25 cents to 35 cents.

"The actually fund has come in for continued selling, though not as large as was we saw yesterday," Smalley said. Institutional investors were reducing their hold in light of the lower dividend.

Kathmandu Holdings led the benchmark index lower, dropping 3.5 percent to $1.39. Earlier this week the outdoor goods retailer posted loss of $1.8 million in the six months ended Jan. 31, from a profit of $11.4 million the previous period. Retailers, particularly those in the rag trade, are squeezing margins to offer discount after discount in a bid to lure shopper back to stores and away from bargain offering online retailers.

"Investors are still digesting the forward guidance the company gave," Smalley said.

Pacific Edge, the Dunedin-based biotech company, was the best performer on the benchmark index today advancing 2.9 percent to 71 cents.