KEY POINTS:
A fresh ripple of sub-prime jitters from Wall St sent the New Zealand sharemarket lower yesterday but market watchers say local investors are relatively well protected against major losses.
In the latest episode of the sub-prime story, shares in Citigroup, the largest US bank, fell 5.9 per cent after Goldman Sachs downgraded them to a sell and said Citi may have to write off as much as US$15 billion ($19.97 billion) in sub-prime exposure over the next six months.
Other financial stocks followed suit, sending the benchmark Dow Jones index 1.7 per cent lower. With the Northern Rock debacle also weighing on the market, losses in London were even worse with the FTSE 100 down 2.7 per cent.
On the local market top stocks followed the overseas sentiment, quickly dropping 65 points to 4049, below where the NZX-50 index began the year.
However, the benchmark index recovered somewhat during afternoon trading to finish at 4067, still its lowest close since late August.
ABN Amro Craigs retail adviser Nigel Scott said the moves were on relatively low turnover, a pattern that had been evident for some time.
While Scott noted the market had been slowly easing over the last six to eight weeks, it was evident that investors were turning to debt markets where rising interest rates were offering attractive returns.
"At the moment in New Zealand bonds are slightly winning over equities."
Scott expected the net effect of the international volatility as well as local factors would see most stocks continuing to trade largely sideways.
Ultimately the market would find support in the form of NZ equities' relatively attractive dividend yield. "A lot of other markets don't have that."
AMP Capital Investors' senior portfolio manager, Guy Elliffe, also believed local dividend yields had provided support in recent weeks and would continue to do so.
AROUND THE WORLD
New Zealand: NZX down 1.16 per cent
US: Dow Jones down 1.7 per cent
UK: FTSE 100 down 2.7 per cent
Australia: ASX down 1.7 per cent
