KEY POINTS:
The New Zealand sharemarket plunged 3.395 per cent today and still the bargain hunters stayed on the sidelines waiting to see just how bad things get on Wall Street.
New Zealand's fall mirrored economies throughout Asia after the Dow in the US had closed over four per cent down.
The world's economies were reacting to the US Federal Reserve's $85 billion loan to AIG, the huge US insurer that lost billions in the risky business of insuring against bond defaults.
* Hong Kong falls 7 per cent
* Japan falls 3.79 per cent
* Australia's S&P/ASX200 falls over 3.5 per cent
* Australia's biggest investment bank, Macquarie Group Ltd., takes a 23 per cent nosedive
It was the NZ market's worst percentage fall since November 5, 2002 and brought back memories of the 5.1 per cent fall on September 12, 2001 when investor confidence crumbled in the wake of the terrorist attacks on the World Trade Centre on September 11.
Brokers said confidence is again the issue and even though the dividend yield for the New Zealand market is high and the listings are much better quality than in 1987 the buyer s remain shy.
The benchmark NZSX-50 index closed down 111.01 points at 3158.92 after the US market dropped to a three-year low. The Australian market was down 4 per cent during the New Zealand afternoon but closed down 2.43 per cent, its lowest close since December 2005.
"The volumes are relatively light. It appears most investors are just nervous and waiting on the sidelines," said Grant Williamson, partner at Hamilton Hindin Greene.
"Even though stocks are looking attractive at current levels investors just really do not have the courage to come into this market at this stage."
Nigel Scott, of ABN Amro Craigs, also said there was only a little bit of selling and the market was trading on news from offshore. But fear was nonetheless a theme.
Telecom continued its sorry decline, down 8c to 273 and some brokers have been monitoring its struggle to remain the biggest stock on the market as its market capitalisation is now very close to Contact Energy's.
Fletcher Building was down 32c to 695. Contact Energy was do wn 15c at 861.
Sky City was down 16c to 354, Pike River Coal was down 18c to 144 and GPG was down 4c to 120.
Fisher & Paykel Healthcare shed 14c to 308. Ryman Healthcare was down 18c to 160. TrustPower was down 22c to 800.
There were only six rises on the market and 105 falls and turnover was worth $148.88m.
In the US the rescue of insurer AIG failed to calm a crisis of confidence in global markets overnight and banks were scared to lend to each other.
In the US, rattled investors worried about who could be the next victim of the global credit crisis.
The Dow Jones industrial average closed down 449.36 points, or 4.06 per cent, to 10,609.66, its lowest level since November 2005. The fall was still smaller than the Dow's 504.48-point plunge on Monday (local time).
The S&P 500 fell 4.71 per cent to 1156.39, its lowest level since May 2005 and its biggest percentage drop since September 17, 2001, when the markets reopened after the September 11 attacks.
The Nasdaq also fell the most since September 17, 2001. It shed 4.94 per cent, to 2098.85, its lowest level since August 2006.
Asian stocks also tumbled as investors feared more companies could succumb to the global financial crisis that forced the US to bail out troubled insurer American International Group Inc.
Every regional benchmark fell deeply in the red.
Hong Kong's Hang Seng Index led the region's losses, tanking 1,272.86 points, or 7.22 per cent, to 16,364.33 - its lowest level in over two years.
In Japan, the Nikkei 225 stock index was down 445.67 points, or 3.79 per cent, at 11,304.12. Australia's S&P/ASX200 index fell more than 3.5 per cent, South Korea's Kospi lost 3.6 per cent and Shanghai's index fell 5.8 per cent.
Investors were unsettled by the Federal Reserve's $85 billion loan to AIG, the huge US insurer that lost billions in the risky business of insuring against bond defaults. It was the latest financial giant to fall in a historic financial crisis on Wall Street that's already claimed investment banks Lehman Brothers and Merrill Lynch.
"It's a complete collapse of confidence," said Francis Lun, general manager of Fulbright Securities Ltd in Hong Kong. "The financial crisis in the US is hitting everyone, everyone is running for cover. If the largest insurance company can fail, than no one is safe."
As equities markets staggered, investors fled to gold, seen as a safe haven in times of trouble. Gold for December delivery rose as much as $90.40, or 11.6 per cent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session.
Financial stocks across Asian went into a tailspin.
Japan's three megabanks fell hard: Mizuho Financial Group, Inc. sank 7.2 per cent, Mitsubishi UFJ Financial Group, Inc. shed 4.6 per cent, and Sumitomo Mitsui Financial Group retreated 7.4 per cent.
Leading China lender Industrial & Commercial Bank of China Ltd, or ICBC, fell over 5 per cent in Hong Kong.
Macquarie Group Ltd., Australia's biggest investment bank and securities firm, took an 23 per cent nosedive.
Richard herring, the director of trading at Burrell Stockbroking, said Australian investors were nervous about AIG bailout.
"It has actually opened up a whole lot of other questions for investors to answer and that is: AIG is on the rack, what else is potentially out there that could go under?" Herring said.
- AP, NZPA
