South resurgent


South Island listed companies showed a 16.9% gain in the quarter to 30 September.

The 19th edition of the Deloitte South Island Index, for the quarter to 30 September 2012, was up by $782 million or 16.9% in market capitalisation, rebounding from a sluggish second calendar quarter. The quarter’s stellar results see the Index up 18.6% during the year to 30 September 2012 with total market capitalisation now standing at $5.41 billion.

Paul Munro, a corporate finance partner in Deloitte’s Christchurch office, says that the third quarter of 2012, generally speaking, paints a rosy picture for the South with market capitalisation appreciation in 23 of the 30 companies listed on the Index.

The Deloitte South Island Index’s 16.9% growth outperformed all benchmark indices during the September quarter, with the NZX 50 up 12.8%, the ASX All Ords up 6.6% and the Dow Jones up 4.3%. The Index’s year to 30 September 2012 increase of 18.6% is second only to the Dow Jones’ increase of 23.1% during the same period.

“The performance of the Index in this quarter suggests that low interest rates in New Zealand are increasing the demand for shares as investors look for higher returns than they can currently achieve on bank deposits,” Mr Munro says.

 “One would assume that the worst of the global financial crisis is over in the South and many are hopeful that the positive trend experienced over the quarter will continue.”

Dare we hope that this really does mean the worst of the GFC is over and the positive trend will continue?

. . .  All eight industry sectors posted positive movements in the quarter to 30 September 2012 led by Biotechnology, which was the standout performer in percentage terms, gaining 40% and ending the September quarter on a record high since the inception of the Index.

The Manufacturing and Distribution and Property sectors, with growth of 13.1% and 17.6% respectively, also achieved their highest monthly closing values since the Index commenced in December 2006.

Growth of 13.1% in manufacturing, do Opposition MPs know about that?

Instead of manufacturing their own manufacturing crises they should be looking at and learning from these businesses which are growing.

The full report is here.

Sth Island listed companies’ index slumps


The South Island Index  of listed companies shows the recession is taking its toll.

Paul Munro, a corporate finance partner in accountancy company Deloitte’s, said the firm’s index of South Island-listed companies had dropped for the first time, slumping 15.2 percent in the September quarter.

Most of that drop was during September, as global financial systems started showing serious strain, the South Island companies contracted 15 percent.

Over the whole quarter, the South Island index dropped by $676 million to a total market capitalisation of $3.78 billion, while during the same period, the NZX50 index was down just 3.3 percent in the quarter.

“Until now the South Island has proven to be relatively well insulated against tightening market conditions in 2008, but we’ve seen this resilience give way,” said Mr Munro.

In a tricky and unpredictable market “the volatility and uncertainty has started to bite”.

There are signs of slowing in North Otago. A couple of dairy conversions which were planned in our area have been shelved and while there are no signs of panic, farmers I’ve spoken to say they’re being much more conservative in their budgeting than they were a few months ago.

Mainland betters NZX-50


We call it the Mainland with our tongues in our cheeks but now we have the numbers to prove we’re weathering economic tough times better than the north.

The Deloitte South Island Index measures the market capitalisation of 33 companies with head offices or the majority of their business in the South Island and puts them into an index relative to their size.

For the first six months of this year, the index was down by 8.5 per cent, beating New Zealand’s benchmark NZX-50 index which fell 21 per cent. Over the last quarter (April to June) it has risen into positive territory, growing 3 per cent versus the NZX-50’s drop of 8 per cent.

However, doing better isn’t the same as doing well as Deloitte partner Paul Munro points out:

At a headline level it shows South Island companies are doing better than the rest of the country, but we need to balance that out with the fact that of the 33 companies measured 61 per cent saw a drop in their market capitalisation.”

Munro said the strong performance over the last quarter had been boosted by larger companies like PGG Wrightson and NZ Farming Systems Uruguay.

PGG Wrightson, the second largest company on the index, grew its market cap by $127 million, boosted by a higher share price and $5 million in bonus shares being issued, while NZ Farming Systems Uruguay saw its market cap increase by $83 million on the back of a rising share price driven by predicted increased earnings. Munro said their strength followed the boom in the dairy sector with record milk solid payouts.

He said this sector was having a positive impact on other businesses and because a greater proportion of business in the South Island was linked to dairying it was helping to hold up the economy.

It’s not all down to dairying, but the record payout from Fonterra and the continuation of conversions from sheep to dairy farms are pouring money into rural communities. That in turn is insulating the provinces from the worst effects of the recession.

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