NZ shares retreat on US nerves
The New Zealand stock exchange has dropped 2.1 per cent after Wall Street sneezed on Friday.
But Hamilton Hindin Greene broker James Smalley said yesterday that trading volumes were ‘‘very light’’, and most investors seemed to be sitting tight.
Economists and analysts around the world are divided over whether financial markets are headed for mild cold or a serious case of the flu.
The Dow Jones Industrial Average Index fell 2.5 per cent on Friday, ending the worst week for United States sharemarket investors for two years, while the Nasdaq composite index finished down 2 per cent.
That has raised fears that a nine-year bull market that has also lifted the NZX to record highs could be drawing to a close.
Global economic growth, employment and company profitability are forecast to remain strong this year.
But there is concern about the prospect of rising interest rates in the world’s largest economy.
Underlying that is a deeper fear that dust swept under the carpet in an effort to tidy up the balance sheets of financial institutions in the wake of the 2008 global financial crisis could resurface.
Governments in the US and Europe are expected to take more steps this year in the long process of unwinding ‘‘quantitative easing’’, to get trillions of dollars of bonds off their own books.
That could flood investment markets with higher-yielding debt that could entice more investors to cash up equities.
The NZX 50 index fell by 1.6 per cent in the first 40 minutes of trading yesterday, before the decline was arrested.
It dipped further in the final hour of trading as further direction came from opening markets in Asia.
High-fliers Pushpay Holdings (down 3.9 per cent), The a2 Milk Company (down 2.9 per cent) and Fisher & Paykel Healthcare (down 3.5 per cent) were among the stocks beating the biggest retreats as investors took profits. Retailer Briscoe Group bucked the trend, with its shares up 1.1 per cent.
Greene said the proportion of New Zealand shares that were foreign-owned had increased over the past few years, so if US investors did cash in equities and switch to bonds that might have more of an impact than it once would.
However, the light trading volumes indicated that was not a big factor at play yesterday.
Local investors looking for an income from their portfolios could still earn a much higher return from higher-yielding stocks than from cashing up and putting their money into one-year bank deposits paying 3.5 per cent, he said.
‘‘Our investors seem to be sitting back, being reasonably levelheaded, and waiting for the reporting season in the next couple of weeks before they make any major decisions.’’