Virus impact to rebound on KiwiSaver
The sharemarket has partially bounced back after a steep fall yesterday morning after concerns about the coronavirus triggered big declines on overseas markets overnight.
The NZX top 50 index was down 1.2 per cent at 3pm at 11,715.38, hot on the heels of a 1.79 per cent slide on Monday. In Australia, the S&P/ ASX 50 was also down 2.24 to 6822.2 just after midday.
Both markets were taking their cue from overseas markets, which fell more than 3 per cent on most bourses across Europe and the United States overnight.
Oil prices are also down over 5 per cent and interest rates are being cut as markets price in central bank moves to help cushion the impact.
Investment adviser Jeremy Sullivan said New Zealanders would probably notice the sharemarket shifts in their KiwiSaver accounts.
‘‘Millions of people have KiwiSaver and they will be invested in shares. The market will affect them,’’ Sullivan said.
‘‘This is the largest move in four years. It is far-reaching and on the back of coronavirus spreading past mainland China, it doesn’t look like it will be slowing down any time soon.’’
But Sullivan advised investors to have a longer-term outlook.
‘‘We have been through these before, whether it be H1N1 or Sars. The sharemarkets have been through the Spanish flu of 1918 and world wars, at the time it must have been pretty serious in what you were hearing but the sun will come out tomorrow.’’
Economist Shamubeel Eaqub said the sharemarket’s impact on KiwiSaver would depend on the age of the investor.
‘‘If you are nearing retirement this is a good reminder that you have your funds in the appropriate kind of risk. But for the majority of KiwiSavers, it makes no sense to change your asset allocation.’’
Equab said the market had been surprisingly sanguine until now.
‘‘I was surprised at how blase the market had been because all the indications have been that the virus is rather more stubborn than Sars and the economic linkages of China compared to when Sars happened is about six times more significant so the economic impact will be way larger.’’
Fears are being fuelled by reports that the virus has picked up pace outside China, with a big jump in infections in South Korea and Italy and several Middle Eastern countries notifying their first cases.
However, the fastdeveloping coronavirus situation was clearly hanging over trading in several stocks including Air New Zealand, which was down 2.9 per cent by early yesterday afternoon to $2.505 a share. The stock was down from nearly $3 at the end of last month.
Air New Zealand estimates it will lose between $35 million and $75m of profit, due to the virus.
Likewise, Auckland International Airport’s share price is nearly 2 per cent lower at $8.16, a sharp drop from $8.65 last Friday.
The Government announced on Monday that it was extending the travel ban on visitors from China.
Michael McCarthy, chief strategist at CMC Market and Stockbroking, said investors were finally beginning to catch up with other markets and to acknowledge the potential supply and demand shocks.
‘‘The disruption to supply chains if countries close borders to contain outbreaks could see global trade grind to a halt.’’