Virus impact to rebound on KiwiSaver
The New Zealand sharemarket recouped most of its losses yesterday in a volatile day on world markets amid concerns over the ongoing economic impact of the coronavirus.
The NZX top 50 index closed down 1.16 per cent at 11,719.23 points, having been down 3.5 per cent during the day. In Australia, the S&P/ASX 50 was also down 1.83 per cent just after 5pm.
Both markets rallied in midafternoon trading after Japan’s Nikkei Index opened sharply lower before regaining ground throughout the morning.
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 econ- omic damage.
Hamilton Hindin Greene investment adviser Jeremy Sullivan said the market was dynamic at the moment and could change quickly.
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 level of impact of the sharemarket shifts 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.’’
Eaqub 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.’’
The fast-developing 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, as Chinese tourist numbers dwindle and Asian air routes are axed.
Michael McCarthy, chief strategiest at CMC Market and Stockbroking, said investors were finally beginning to catch up with other markets and acknowledging 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.’’