Key Points:

Bargain hunting investors yesterday helped the NZX outperform almost all its international peers as most global markets suffered their biggest falls for a decade.

But the benchmark NZX-50 index still closed lower, for the 14th session in a row.

Signs of panic emerged on sharemarkets around the world with investors growing increasingly fearful of a US recession which could impact on the global economy.

In New Zealand the NZX-50 benchmark index fell sharply on opening yesterday, losing almost 4 per cent but recovered to close down 39.77 points or 1.1 per cent lower at 3607.13.

Markets elsewhere fell by between 5 per cent and 8 per cent.

Australia's ASX-200 fell 7.05 per cent yesterday - it's worst fall since 1987 - and Britain's FTSE 100 lost 5.5 per cent overnight Monday. Hong Kong's Hang Seng lost 8 per cent, it's worst drop in a decade.

ASB Securities retail adviser Stephen Wright pointed to the relatively low turnover on the NZSX during its losing streak. "There's no wave of panic, but having said that, markets are determined by their most marginal sellers and buyers."

Some of ASB Securities' clients - "a couple of handfuls" - were ringing each day wanting to sell up. "But the buyers are just as panicked and are not buying so therefore prices fall. It is sharp and it is disappointing but we're being wholly driven by the marginal selling."

Macquarie Equities investment director Arthur Lim said there was "an element of panic out there," on the New Zealand market.

"We are in the grip, definitely, of a market in fear."

Typically their were three major psychological drivers for market participants , Lim said.

"Fear, greed and hope. As a driver, fear is nine times more powerful than greed".

But Lim believed selling was largely driven by institutions who had to liquidate positions due to redemptions from spooked investors and also by those overseas investors who had borrowed to finance their position and who, due to falling prices, were now receiving margin calls - requests from their financiers to put more of their own money on the line.

"Usually they would put more money in, but in this kind of market people are more inclined to sell shares."

However, turnover remained low, not necessarily because investors were sitting tight, but as ASB Securities' Wright pointed out, because there were few buyers for sellers to offload their stock to.

Nevertheless, there were some signs that prices for some stocks had fallen to the point where they were attractive, said Lim.

Contact appeared to be a good example. In early trade yesterday it fell 37c, but recovered much of that to close down 15c at $7.13, on reasonable turnover.

"The shares have fallen to such a level whereby I think the buyers are emerging and perceiving value and the sellers are able to liquidate their position. That's why today we're seeing some volume now going through. Somewhere along the line the market will find a level whereby the sellers can sell in volume and we're starting to see that."

Broker James Smalley of Hamilton, Hindin Greene noted that the local market had done well yesterday in comparison to others in the Asia Pacific region.

Smalley put the resilience down to two factors, the NZX's lack of large financial stocks that elsewhere have been hit hard by the US sub-prime related credit issues, and the effect equity market problems were having on currency markets.

The kiwi closed at US74.58c yesterday having touched a four-month low of US74.01c during the session. That is good news for exporters who have suffered over the last couple of years as the local currency traded consistently at high levels against those of our largest trading partners. It has now lost 6 per cent of its value against the US dollar in eight days.

"That's why in particular we've seen some rather strong bounce backs from the two Fisher & Paykel stocks and perhaps a little bit more reality come into some of the large cap stocks."

After falling 4c early in yesterday's session both Fisher & Paykel stocks closed higher for the day, Appliances up 7c at $3 and Healthcare 5c at $3.20.