KEY POINTS:
The New Zealand share market has in the past de-coupled from the direction set by offshore markets, but it now appears to be in step with trends in Australia, particularly with the emergence of private equity partnerships.
Major offshore markets have been knocked around since February, when a
sharp sell-off in Chinese equities prompted a wave of selling. Concerns about the US sub-prime lending market have added to investor jitters.
The NZSX-50 index ended on Friday at 4037.59, down 4 per cent from its peak of 4216.29 set on February 7. Australia's S&P/ASX 200 index ended 5836.3, down 3.57 per cent from its record high of 6052.1 set on February 23.
Tower Asset Management head of New Zealand Equities, Wayne Stechman said: "The New Zealand market has done very well, as have the overseas markets, but don't expect to see the 20 per cent growth here that we've seen over the last three or four years," he said.
Corporate New Zealand remained in good shape but companies were now looking at single digit rather than the double digit growth of the last few years, Stechman said.
Arthur Lim, investment director at Macquarie, said the local market had gone through a fair, long overdue, correction. "The market was due for a decent correction but there have been expectations, perhaps, by some, that investing in a market is all about a one-way track of making money," Lim said.
"Those who have been around long enough know that's not how the real world operates," he said.
The New Zealand share market had, at times, seemed divorced from world events.
Foreign markets performed strongly from 1997 to 2000, with the Dow Jones industrial index doubling to around 11,400 while the local market did nothing.
Conversely, it was in the aftermath of the dot com bubble burst of March of 2000 that the New Zealand market started to boom.
But Lim said the past 12 months have seen the market track the overseas markets again, becoming more closely aligned with Australia.
"More importantly, corporate and private equity type players are now a very significant force in the local market," Lim said. There were signs that the New Zealand economy was past its worst and commodities prices were still strong, he said.
"The New Zealand market has always been more of a individual stock-pickers market rather than a market that moves in unison with the state of the economy," he said.
But Lim said the market is going to be volatile for some time yet.