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The NZX-50 followed overseas markets higher yesterday, taking its gains over the last four days to more than 5 per cent and sparking tentative optimism that the worst of the credit crunch may be over.
The New Zealand market's benchmark index closed 59 points, or 1.68 per cent, higher at 3592.8, adding to Tuesday's 1.78 per cent gain. It has now risen 5.5 per cent since last Thursday's 12 month low of 3404.55 over the last four sessions. "It's a bit of a relief rally and almost enough to change sentiment from negative to cautious," said ABN Amro Craigs retail adviser Bryon Burke.
The local market's gain yesterday came after a big surge on Wall St on Tuesday as investors became hopeful that stressed banks were starting to put housing-related investment losses behind them and come clean about outstanding mortgage loan write-offs.
US investment bank Lehman Brothers said it had raised fresh capital totalling US$4 billion ($5.1 billion) and while Swiss banking giant UBS divulged fresh losses of US$19 billion it raised hopes it was getting a grip on its stricken balance sheet.
That saw the Dow Jones Industrial Average gain 3.19 per cent, the Nasdaq 3.67 per cent and Standard & Poor's 500 3.59 per cent.
The positive financial sector sentiment helped lift banking stocks on the Australian market where the ASX 200 rose 2.64 per cent.
"Financial markets are probably all breathing a sigh of relief and hoping this is a sign of things to come," said Burke. Indeed some of the biggest gainers in recent sessions were those stocks driven sharply lower by a combination of effects including particular fund managers being forced to unload large parcels.
Rakon was a prime example, yesterday closing at $3.30 having gained more than 30 per cent in the last four days, albeit on a handful of shares traded. "All we need now is a few more players and a bit of liquidity to consolidate the gains," Burke said.
