Could it happen again?
Why it’s different this time: Better regulation
In 1987 there was no FMA, no continuous disclosure rules, no Takeovers Code and insider trading was legal.
More sophisticated investors
In 1987 there was no internet and research was difficult, yet people invested directly in the market. Now most invest through professional, diversified funds.
Better companies
In 1987 the market was dominated by investment companies with lots of debt. The NZX50 is now dominated by well capitalised infrastructure and retail companies with good cashflow.
Dividend focus, not capital gain
Our market is underpinned by investors seeking dividend yields, not capital growth. That means they should be less prone to panic selling in the event of a global crash.
Why it might not be: A record bull run
The NZX50 has been rising for eight years and is up almost 250 per cent. Few in the market believe that kind of growth is sustainable.
NZ stocks among most highly valued in world
Offshore funds have poured into the NZX50 because many companies offer dividends well above bank rates. If interest rates rise sharply, there could be a rapid exit.
A handful of soaring growth stocks
While the NZX50 is much more solid, a lot of its rise in the past few months has been focused on a handful of growth stocks.
An uncertain global outlook
1987 had Iranian tension and a hurricane or two but otherwise it looked like a picnic for global risk compared to 2017.