Airport shares plunge on rule change 

Shares in Auckland International Airport have taken a plunge, dragging down the whole sharemarket after a government move to change overseas investment rules.

Auckland Airport shares plunged 24 cents or 12% on Tuesday, resulting in enough of a fall to drag the rest of the market down.

Finance Minister Michael Cullen rushed through a legislative amendment on Monday night aimed at protecting New Zealand's strategic assets.

Under the change, ministers will be able to block the sale of assets to a foreign company if it runs counter to the need to maintain New Zealand control of what it calls "strategically important infrastructure on sensitive land."

It means the bid by the Canadian Pension Plan for a 40% stake in New Zealand's biggest airport is now looking increasingly unlikely.

The government says the move was made to provide certainty to financial markets regarding its intentions.

But one analyst say it's likely to have the opposite effect. Business commentator Brian Gaynor says changing the rules midway through negotiations for Auckland Airport will create uncertainty in New Zealand's financial market.

The concern is echoed by Airport Chairman Tony Frankham.

"The difficulty it has created is uncertainty in the market place as has been exemplified in the drop in the share price," says Frankham.

The Canadian Pension Fund believes the government's move could backfire.

"It only encourages people to accept the offer, the stock price has been as low as $2 during the day, therefore people would be very motivated to achieve a higher price," says Canadian Pension Plan Investment Board spokesman Graeme Bevans.

But major shareholder Auckland Mayor John Banks says the move leaves the Canadian bid stranded.

"In terms of Auckland City strategic holding in the airport the Canadian bid was never helpful," says Banks.

The Canadian Pension Fund is offering $3.60 a share for a 40% stake in the airport, needing the approval of more than 50% of shareholders.

"I suspect as a result of crown interference in the process shareholders will say bugger you we are accepting now," says New Zealand Shareholders Association spokesman Bruce Sheppard.

But for now shareholders are in a holding pattern.