Investors aggressively sold off shares as they re-evaluated the risk posed by covid-19 following an increase in the number of infections outside China.
Greg Smith, head of research at Fat Prophets, said the spread of the virus into Europe lent validity to the fear the virus was becoming a pandemic.
"The concern here is that it has spread outside of China, rather than being contained in that region," he said.
"The 'p-word' is increasingly coming into the lexicon, after it was mentioned by the World Health Organisation yesterday, who said it is not a pandemic yet, but it could become one."
Summerset Group led the market lower, down 8.1 per cent at $8.32 on a volume of 2 million shares. It said it isn't expecting any underlying growth this year due to rising expenses and falling margins.
The retirement village operator and developer said its full-year underlying net profit for calendar 2019 was $106.2m, up slightly from $98.6m in the prior year.
"That was a weak result and markets are certainly in no mood for it on a day like today. With headwinds on the bottom line, increased wages coming through and weaker development margins and generally weaker outlook, it is no real surprise investors have reacted harshly," Smith said.
Tourism stocks were hit hard in the sell-off, as they are most affected by efforts to contain the contagion.
"Countries could potentially be stepping up travel bans and monitoring people coming in and out, people will be putting off taking trips. So, tourism and travel are going to be the initially most affected," Smith said.
Air New Zealand fell 4.3 per cent to $2.47 on a volume of 1.9 million shares, Tourism Holdings declined 2.6 per cent to $2.65 and Auckland International Airport fell 1 per cent to $8.24 on a volume of 1.9 million shares.
"Air New Zealand has already suspended flights to South Korea, this is going to be more and more of a headwind." Smith said.
Mercury NZ decreased 0.8 per cent to $5.36 as it trimmed its full-year earnings guidance by $10m, due to dry weather emptying out hydro-electric water storage in the North Island. Vector, who also reported flat earnings today, fell 2.7 percent to $3.23.
Smith said these energy stocks were generally considered defensive stocks, so were less likely to be caught up by the negative sentiment.
"They should, in theory, hold up better in a sell-off, but their valuation has been getting pretty high and these are flat outlooks," he said.
Pushpay Holdings, which generates most of its revenue in the US, dropped 2.4 per cent to $4.15, and fruit exporter Scales Corporation fell 0.7 per cent to $4.27.
Chorus rose for a second day after yesterday signalling plans to pay bigger dividends, rising 2.4 per cent to $6.89.
A2 Milk rose 1.5 per cent to $15.86 on a lighter volume of 772,000 shares. The company will report its annual result on Thursday and Smith said some investors were buying in ahead of that result.
"It's a ringing endorsement that on a day like this it can nudge up a couple of percent," Smith said.
"It remains to be seen if it is warranted as there is certainly risk since China is a primary market for A2."
Outside the benchmark index, online travel booking company Serko today said over the past week it has seen a drop-off in bookings due to coronavirus. The stock dropped 6.3 per cent to $4.30.
