NZ resists worst of overseas panic

Local investors are responding "less wildly" to the ongoing fear and trepidation in overseas equity markets, a broker says.

The NZX-50 opened down 1.8 per cent yesterday, before shrugging off steep falls on European and United States markets to finish the day up 0.78 per cent - building on Wednesday's 2.78 per cent gain.

"I think local investors are getting used to the offshore volatility and are saying, 'We don't want really want to have these wild swings in the local market,"' said Grant Williamson, a director at Christchurch sharebroking firm Hamilton Hindin Greene.

He said the sell-off between Friday and Tuesday that knocked billions off the value of NZX-listed firms appeared to have mostly "dried up", although continuing volatility overseas could drive more selling.

"Most investors are now not prepared to sell at significantly lower levels than where we currently are," Williamson said.

Local investors generally were not as highly leveraged as those abroad, where trading on margin was more common.

"If prices fall they get margin calls [from brokers] then they have to sell," Williamson said. "In New Zealand we don't have so much of that so we don't really have a lot of forced selling in the market."

Speculation about a potential downgrade of France's AAA credit rating - after rumours about the financial health of French bank Societe Generale - sent jittery European investors and the US back into panic mode yesterday.

European and United States stocks plummeted, reversing gains made during the previous day's trading.

In the US, the Dow Jones industrial average finished down 4.6 per cent, while the Nasdaq fell 4.1 per cent.

France's CAC 40 lost 5.5 per cent and Britain's FTSE 100 closed down 3.1 per cent, a one-year closing low.

Williamson said a solid quarterly result from Mainfreight helped to raise NZX investors' confidence.

The international logistics operator's result showed that despite a very volatile global environment, many local firms were doing well with good prospects, he said. Mainfreight reported a $14.2 million net profit for the three months to June 30 - more than double that for the same period last year. Its shares closed up 15c at $9.77.

Like the NZX, the New Zealand dollar also faced an initial sell-off as a result of the panic in Europe and the US - falling from US83.75 at 11pm on Wednesday to US80.67 at 8am yesterday, before recovering ground to sit at around US82.14 at 5pm.

Westpac senior market strategist Imre Speizer said he had expected the US Federal Reserve's statement on Wednesday - that it would hold interest rates at record lows until mid-2013 - to have a more positive impact on equity markets than it did.

"The Fed's move was unusual and supportive," Speizer said. "It was unusual how little effect it had and that's a worrying sign for the next few weeks."

He said the Kiwi was unlikely to rise much higher than US84c, before falling back to US78c over the next 14 days.

Forsyth Barr head of research Rob Mercer said global markets were likely to remain jittery for weeks.

"When you get this level of volatility things happen not for fundamental reasons but because of emotions," he said. "But if you focus back on [local] and Australian equities they're actually quite well placed."

Australia's ASX200 dropped 2 per cent in early trading, before closing down 0.01 per cent. Austock Securities strategist Michael Heffernan said the ASX had been buoyed by Telstra's better-than-expected results offsetting Wall St's tumble.

Japan's Nikkei 225 index sank 1.2 per cent soon after opening, before finishing the day down 0.6 per cent, while Hong Kong's Hang Seng index was trading late yesterday down 0.6 per cent after a large early fall.

- Additional reporting: Agencies

AROUND THE WORLD
* NZX-50: +0.78pc
* ASX 200: -0.01pc
* Nikkei: -0.63pc
* Dow Jones: -4.62pc
* FTSE 100 (early trading): +2.04pc