Click on the link to hear the NBR radio interview. 3m34s
The New Zealand share market retreated again today, following intense volatility on Wall Street and other markets last week, cheap oil and scepticism over the Chinese economy.
But the sell-off of local shares was less severe than anticipated perhaps, after last week’s global turmoil.
The S&P/NZX 50 index was down nearly 2% this morning at 6055 – the lowest level since December 16.
However, by 3pm the index had recovered some ground to be down 1.64% at 6068.
The global equity market has been a roller-coaster so far this year, after many investors were spooked by the Chinese stock market’s plummet.
Added to the worries was the glut of oil supply, which has pushed prices to 12-year lows, fuelling speculation central banks will have to reassess their tracks for inflation and raising the prospect for interest rates to stay low.
Stocks on Wall Street continued to drop on Friday, with the S&P 500 index falling 2.2%, taking its decline this year to 8%.
Craigs Investment Partners financial advisor Nigel Scott says it was a relatively steep drop this morning, but the volumes traded were quite low.
He says the volume traded was way down on Friday’s numbers, despite last week being relatively flat.
One of the main reasons the NZX-50 didn’t fall more dramatically than it did was because New Zealand has very few larger cap stocks which have significant assets outside the country, he says.
Mr Scott says there would need to be a “significant downturn and change of sentiment,” or some corporates revealing their outlook is not as strong to have a bigger impact on the local share market.
New Zealand's NZX-50 is down 4.2% so far this year, while Australia's S&P/ASX 200 index is down 7.6% since the year started.
Hamilton Hindin Greene Investment Advisor Jeremy Sullivan says these periods of globally volatility tend to not have as big of an impact on New Zealand markets as they do on other markets.
“Quite often what you will see is movements in the US markets are mirrored in direction on the NZX, but not in the level of volatility.”
He says New Zealand markets are in for more volatility in the coming month, especially with further concerns stemming from China.
“When you have a communist society running a capitalist index, there are going to be a few unintended consequence,” he says.
“I do believe that many fund managers around the world have perhaps lost some faith in the Chinese regulatory bodies and their abilities to control their capital markets.”
But he says he expects some stabilisation in the equity markets in the “not too distant future.”