The worldwide hunt for yield saw foreign ownership of the New Zealand share market increase to 36.3 per cent - it highest point since 2011, investment specialists JBWere said.
The level of foreign ownership was 32.6 per cent last year, JBWere said in releasing results of its survey, which covered 70 companies accounting for 96 per cent of the S&P/NZX All index.
JBWere said foreign ownership in the New Zealand market remained relatively high compared with many of its developed-market peers.
"This doesn't altogether surprise us given the New Zealand market consists of a number of high-quality, stable companies that, in many cases, pay attractive dividend yields," it said.
JBWere, noting the recent rise in world bond yields, said the current high levels of foreign ownership may soon diminish if international bond yields continue to rise in the aftermath of Donald Trump's success at last month's US presidential election.
"As at the time of writing, New Zealand equities trade at a 23 per cent premium to global equities, with low interest rates a key driver. Any change here could see our premium eroded," JB Were said.
In October, for example, a 23 basis point rise in US 10-year Treasury yields saw the equity market weaken by 5.5 per cent, and during November an additional 56 basis point rise in US 10-year Treasury yields saw the New Zealand market weaken a further 1 per cent.
"Accordingly, further increases in bond yields will likely be a headwind for the New Zealand equity market," JB Were said.
At the same time, an obvious by-product of higher bond yields is a more attractive fixed income market, it said.
"Given this, we would not be surprised to see further reductions in New Zealand retail investors' ownership of our market," it said.
"We also expect that the level of foreign ownership of our market could very well fall in 2017 as the global 'hunt for yield' thematic continues to drift out of fashion," it said.
The most significant driver of the observed increase in foreign ownership was a reduction in the proportion of ownership by New Zealand retail investors in favour of offshore managed funds.
JBWere also observed a reduction in ownership by NZ managed funds and an increase in NZ strategic stakes.
This was a reversal from trends observed over recent years, which saw both retail investors' and NZ managed funds' holdings increase.
JBWere said the initial public offer market remained subdued, with just three offers in 2016.
"That said, some further new listings resulting from separations of existing assets shows corporate activity remains alive and well in New Zealand," it said.
New Zealand equity market's capitalisation its at 41 per cent of GDP, the highest level since 2000 - low by world standards but representing an increase from 37 per cent last year, JBWere said.