Independent Newspapers shares reached their lowest level for three years yesterday when they fell 70p to 200p after the company's own broker, Davy, cut its forecasts and suggested that Independent will generate nil earnings growth this year and next.

The huge fall in the share price provoked Independent to go into the market buying its own stock and the group spent £1.65 million buying 750,000 shares at 220p each. This is the third time in six weeks that Independent has supported its share price in this manner. In mid-October it bought in 500,000 shares at 225p each and two weeks earlier bought in 800,000 shares at 235p.

No Davy spokesman was available to comment on the downgrades, but it is understood that the brokers have forecast earnings per share this year and next year of 20.5p. This compares with Davy's previous earnings forecasts of 20.7p for 1998 and 23p for 1999.

It is understood that the downgrade has been triggered largely by the deterioration in the South African economy, where the rand has plummeted in recent months and interest rates have risen as high as 24 per cent. Independent is the largest newspaper publisher in South Africa, with a chain of national titles and would be severely affected by any major downturn in the economy there.

Independent shares fell initially from the overnight 270p to 250p, then 230p, 225p, 220p and 200p before recovering to 220p when the group bought in the 750,000 shares. At the close, however, the shares were offered at 220p suggesting that they may come under renewed selling pressure unless markets move ahead.

NCB analyst, Mr Rory Gillen, was less negative about Independent's prospects than Davy and said that at most he would trim his existing earnings forecasts of 21.2p for 1998 and 23p for 1999. "The reason for any cut in forecasts would be the impact on second half earnings from South Africa. The economic difficulties in New Zealand are already priced in."

He added that at 200p the Independent shares had been oversold and that at 220p the shares are at a likely floor and should move upwards if investors believe that South Africa will not have any greater impact on earnings than currently thought.