Markets calm after election

New Zealand's financial markets have greeted Saturday's indecisive election result with mild disappointment, and caution over post-election horse trading.

The sharemarket's benchmark NZSX-50 index closed 11.28 points or 0.33 per cent lower at 3423.60 yesterday, and the kiwi slid to a two-week low of 69.86USc before ending at 69.97USc - slightly down on Friday's local close.

First NZ Capital research manager Barry Lindsay said the sharemarket would obviously have preferred a National Party win and last week's highs on Thursday and Friday were "in anticipation that was going to get delivered".

Instead, voters marginally favoured the Labour Party in a near stalemate that won't be resolved for at least two weeks.

"It's not ideal," Lindsay said. "But then again it's not horrendously bad so as to frighten investors away."

"If this goes on for too long then the markets will start to get a little anxious." But he said the market understood the experience of 1996 was unlikely to be repeated.

"I think the market lives with MMP now and rightly. It doesn't dwell on the need for certainty perhaps to the extent that you might feel it should."

Bancorp Treasury Services director Earl White said despite its dip to a two-week low, the kiwi's reaction yesterday had been "underwhelming to say the least".

Overseas investors yesterday continued to buy the kiwi, attracted by New Zealand's comparatively high interest rates.

"The offshore investors who are pouring their money into these eurokiwis and urudashi bonds haven't panicked, that's for sure.

"I think the 50 to 60 points lower we've seen is probably realistic," said White.

"The other thing is the German election has been ever so slightly inconclusive as well and we've seen a bit of euro weakness and that's probably another reason why the kiwi's down a bit as well."

White said the kiwi would likely soften if coalition talks dragged on unduly.