South Island listed companies again outperformed the wider NZX-50 during the three months ended June, according to the Deloitte South Island Index.
The South Island index achieved an overall gain of 3% in the second quarter, increasing its overall value by $100 million to a total market capitalisation of $3.8 billion.
In contrast, the NZX-50 was down nearly 8%.
The Deloitte South Island index measures movements in market capitalisation, tracking the performance of listed companies with a registered office and-or a substantial portion of their operations in the South Island.
There were 32 companies in the index in the first quarter of 2008, increasing to 33 in the second quarter with the addition of Widespread Energy.
Deloitte Dunedin partner Steve Thompson said that despite the 3% gain in the South Island index, a total of 61% of companies in the index recorded a reduction in their market capitalisation in the quarter.
"The main point is that although there are fears that New Zealand may be entering a recession, it is not all doom and gloom, particularly if we look at the relatively strong performances of companies such as PGG Wrightson, NZ Farming Systems Uruguay and Cavotec MSL Holdings.
"The South Island has some companies, particularly in the primary sector, that are continuing to buck the downward trend of the market."
Five of the eight South Island sectors experienced falls in the second quarter.
The stand-out exception was the primary sector, which was up 18.5%.
Retail (down 12.5%), biotechnology (down 8.6%) and technology (down 8%) were the hardest-hit in the quarter, he said.
There was some pain in some of the smaller sectors of the South Island economy.
The implications of the weak economic conditions were that the South Island was in for a period of tightening in many sectors and good cash-flow management would remain a critical factor for many businesses.
Despite a 7% decline in market capitalisation, Ryman Healthcare remained the South Island's largest listed company at $795 million on June 30.
It was followed by PGG Wrightson on $723.2 million and NZ Farming Systems Uruguay on $425 million.
Of the top 20 companies in the South Island index, NZ Farming Systems Uruguay recorded the largest increase in market capitalisation, soaring by 24.2% in the quarter.
PGG Wrightson, which has a substantial holding in Farming Systems, increased its market capitalisation by 21.3% in the quarter.
Mr Thompson said the NZX-50 took a tumble in the last week of the quarter and closed for June at its lowest level since December 2005.
Several companies saw their share prices hit their lowest market in several years, fuelling the suggestion New Zealand was in a bear market.
The next quarter's results would prove interesting as the impact of reporting by companies with a June 30 balance date flowed through to market prices.
This would also be the first time several of the companies had reported under International Financial Reporting Standards, he said.
