Shares plunge 4% after dive in world markets

By NZPA

Tuesday 22nd January 2008

An overnight slump in European sharemarkets overnight sent stocks plunging 4% today, extending market losses to a record 14th consecutive session.

The exchange's benchmark top-50 index dived 141 points in the first 30 minutes this morning to 3506, its lowest level since September 2006.

The index lost 5.4% last week and had dropped 10% already this year before today's plunge. The market is now down 19% off its last peak in early October.

"The mood is pretty sombre but I don't think anyone is jumping out of the building," said First NZ Capital broker Malcolm Davie. "It's following global sentiment, nothing more than that."

He said volumes were light but there was a lack of buyers. The turnover suggested even bargan hunters were not being dragged in.

"The whole market has just gone down a notch and there is a lack of confidence on the buy side."

Stocks around the world, with the exception of the United States, which was on holiday, went into freefall overnight with investors bailing into safe-haven bonds and currencies amid fear a deteriorating US economy will drag others down with it.

`It's very frightening and people are just concerned (over) recession fears, credit fears," said Jawaid Afsar, a British trader at Securequity.

"Writedowns and all the rest of it are just part of the same sort of thing at the moment."

Every share in the NZ top 50 index was down today with market leader Telecom off 14c to $3.95, No.2 Fletcher Building down 54c to $9.46 and No.3 stock Contact Energy down 30c to $6.98.

Among the hardest hit, Infratil was down over 7%, 19c to $2.36, Ryman Healthcare 11c to $1.59, or 6.5% and Ebos 27c, 6%, to $4.48.

Overnight, the pan-European FTSEurofirst 300 closed down 5.8%, taking its 2008 year-to-date losses to more than 15%.

Losses on blue-chip stock indexes of Germany, Britain and France alone overnight amounted to more than $US350 billion ($NZ468b), or roughly the size of the combined economies of New Zealand, Hungary and Singapore.

Britain's leading shares fell 5.5%, suffering the largest one-day loss since September 11, 2001. The FTSE 100 closed down 323.5 points at 5578.2, its lowest close since June 2006 and wiping nearly Stg77 billion ($NZ201.5b) from the value of its constituent stocks.

Britain's blue-chip index has now lost more than 13% since the start of the year.

Germany's DAX lost 7% overnight and the French CAC 40 dropped almost 7%.

Macquarie Equities NZ investment director Arthur Lim said following falls of the magnitude experienced in Europe meant New Zealand markets could not avoid a hit.

But he did not expect the full impact to become clear until the opening of the Australian market.

The Australian market and the Dow Jones in the US were probably the more important in terms of a flow through effect to this country, Lim said.

MSCI's main world stock index, a benchmark gauge of stock markets globally, sank 3.3%, falling below its 2007 bottom to lows last seen in December 2006 and taking it down more than 12% so far this year.

While US markets were closed for the Martin Luther King Day holiday, stock index futures were down sharply, suggesting investors were not putting much hope on Wall Street leading a rebound when it returned to business.

Elsewhere, Toronto's stock market was down around 4.5% and Japan's benchmark Nikkei average earlier lost 3.86% to close at a two-year low.

The Australian sharemarket fell nearly 3% yesterday, extending its longest losing streak in a quarter of a century.

Meanwhile, the New Zealand dollar slid to a 10-week low against the greenback early as part of investors' flight away from risky assets.

From around US76c at yesterday's local close, the kiwi fell to US74.5c.

The Kiwi has lost 6% in value in just over a week.

Westpac Bank dealing room boss in New Zealand, Lloyd Cartwright said with the US market on holiday the currency market was subdued.

Most of the action happened overnight, he said.

He said there was an element of contagion from the US into world markets. People had initially expected the credit crunch effects to be largely confined to the US.

"That view is starting to be tested globally. People are now this could have some wider ranging global economic impacts. Hence you are seeing a re-rating of some of these currencies. The carry-trade type are definitely suffering."

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