New Zealand shares are falling amid ongoing market turmoil that has pushed global stocks into full-blown bear market territory.
The MSCI All-Country World Index fell 1.3 per cent overnight, taking its decline from its peak last May to 20 per cent, Bloomberg reported.
An index fall of 20 per cent or more is considered a bear market.
"It [the MSCI decline] reflects that this is a reasonably violent sell-off," said Bernard Doyle, an investment strategist with JBWere New Zealand. "In the context of post-GFC sell-offs it's at the harsh end of the spectrum."
Other indices also saw steep falls overnight after Hong Kong's sharemarket had its worst start to a lunar new year since 1994 yesterday, falling almost 4 per cent.
The S&P 500 on Wall Street slipped 1.2 per cent, while London's FTSE 100 fell 2.4 per cent.
Gold rose 4 per cent to US$1247.98 an ounce overnight as investors fled to safe havens.
New Zealand's S&P/NZX 50 had fallen 0.89 per cent, or 53.1 points, to 5933.91 at around 11.30am.
Major decliners on the local benchmark index included Z Energy, down 3.3 per cent at $5.85, and Refining NZ, down 2.9 per cent at $3.40.
The NZX 50 has fallen 6.3 per cent this year from its December 31 record.
A slump in commodities, fears about the outlook for global growth and an economic slowdown in China have all contributed to the torrid conditions seen in markets this year.
If this drags on for another several months I don't see how New Zealand could continue to be insulated.
SHARE THIS QUOTE:
And a new source of volatility emerged this week, with investors becoming concerned about credit risks facing European banks and the impact negative interest rates will have on lenders' earnings.
Japan's central bank adopted negative interest rates on January 29 and Janet Yellen, chair of the US Federal Reserve, commented overnight that America's central bank was weighing up whether it could also use negative rates.
"We had previously considered them and decided that they would not work well to foster accommodation back in 2010," Yellen said, according to Bloomberg.
"In light of the experience of European countries and others that have gone to negative rates, we're taking a look at them again because we would want to be prepared in the event that we needed to add accommodation."
Such a move would be a major turnaround for the Federal Reserve, which began raising rates for the first time in almost a decade in December.
Greg Peacock, chief investment officer at Auckland fund manager NZAM, said investors were losing confidence in central banks.
"I think markets are starting to question the whole validity of QE [quantitative easing] and the ability of central banks to support markets, whether they should be supporting them, and how effective they are and what ammunition they've got left," he said.
New Zealand's sharemarket has been relatively insulated from the global volatility so far, but Peacock questioned whether that could continue if the sell-off went on for much longer.
"If this drags on for another several months I don't see how New Zealand could continue to be insulated."
Doyle said the underlying economic situation in big economies including the United States didn't warrant the kind of volatility seen in markets this year.
"We're trying to apply some cool-headed logic to the situation," he said. "We think this is a little bit of a tantrum from financial market participants and people in the real world are still getting up and going to their jobs."
At around 45 days, this year's sell-off had been slightly longer than the average length of 40 days for other bouts of volatility that had enveloped markets since the global financial crisis, according to Doyle.
He said a "real deterioration" in economic data would be needed for the turmoil to continue.
"To me, that's the missing link in this sell-off."