New Zealand sharemarket descends into correction territory – Stock Takes

Wall Street has come close to bear market territory during the latest sell-off. Photo / 123rf

The New Zealand sharemarket is now in correction territory, but it could be worse.

The generally considered correction threshold is seen to be a 10% or more fall from a market’s recent peak.

At last glance, the S&P/NZX50 index was down 9.38% from its high after at one point being 16.4% lower.

The local market has, however, been quite resilient compared to others.

Markets this month bounced off their lows thanks to US President Donald Trump dialling back on his attacks on US Federal Reserve chairman Jerome Powell and on some elements of US trade policy.

But Wall Street’s S&P500 index is still down by 12.5% from its recent peak, having at one point being 18.9% lower.

The Nasdaq, which has a high proportion of US technology stocks as its constituents, is down 17.2% from its peak, after being 24.3% down.

Japan’s Topix is down 11.2% from its recent high, after earlier losing 21.9%.

The MSCI Europe, which excludes the UK, was off by 10%, while Britain’s FTSE 100 has been let off lightly, falling by just 6.1%.

Australia’s ASX200 index is off by just 6.9%.

US markets have flirted with being in a bear market – a decline of 20% plus.

“Long story short, we fell into a correction,” Craigs Investment Partners investment director Mark Lister said.

“That’s a 10 % decline – and we are still hovering around those levels,” Lister said.

“While that’s not enjoyable for investors, it is resilient when you compare it to the likes of the US market, with the S&P500 being down more heavily.

“It was down 19% at one point. Today it’s down 12.5%, so we’re holding up better than they are.”

Lister noted that both Australia and Britain appeared to be more resilient.

“It tells us that the US has been at the epicentre of the sell-off, which is unsurprising because the tariffs will impact the US first and foremost.

“And if you do believe that parts of the world will slip into a recession because of this, it’s probably the US that will be at the front of the queue because of that.

“Plus you’ve got money leaving the US and going elsewhere.

“Money’s headed to Japan. It’s headed to Europe. Investors are not completely ditching the US, but certainly reducing their exposures.

“So that’s accentuating the downside because you’ve got money exiting.

“And you’ve also got all those tech stocks that have had such a cracking run, which is just ripe for profit-taking because of that.

“All of those things put together are hitting the US harder than most.

“Then you’ve got places like ourselves that are a little bit insulated, a little bit more sort of safe and steady in terms of the types of stocks we have on our market, and we’re holding up better.

“I think it’s tough to predict where things will go from here because the swing factor in terms of whether things get worse or recover is political.

“You’re predicting political movements, which are incredibly difficult.

”If you get a de-escalation in the trade policy, then markets will rise and perform well and the US and other countries will all avoid recession.

“If you get an escalation and if the tariffs stay on and at high levels, then you’re definitely going to get a slowdown.

“You might get a recession of some magnitude in some places, and markets will go lower.

“That’s what it comes down to, and it’s really tough to predict what will happen.

“I still feel like New Zealand will come out of this better than most, we’re not in the firing line, interest rates are headed lower here, so that will be supportive.

“Growth will pick up over the balance of the year, if the tariffs stay on then growth picks up more slowly but it’ll still improve from where we were at last year, the year before.

“And our market is a little bit insulated because lots of companies and sectors are domestic-facing and of a more defensive, stable nature so I feel like we’re positioned better than most.”

Tower up

Kiwi insurer Tower now expects to report a net profit of between $70 million and $80m, up from the previously advised range of $60m and $70m.

The new guidance assumes full utilisation of the $50m “large events” allowance.

So far in full-year 2025, Tower has recorded one large event – the Dunedin flooding in October, with an estimated cost of around $3m.

Brokers Forsyth Barr said the new guidance was about 6% better than its own estimates.

“Once again, the driver of the improved outlook has been lower-than-expected BAU [business as usual] claims, reflecting favourable weather conditions, moderating inflation, and the impact of Tower’s enhanced risk-selection,” Forsyth Barr said.

“We now forecast a BAU claims ratio of 43% for 2025, which is considerably below the long-term trend of about 50%.”

Only $3m of large event costs have been recognised in FY25 to date, although the Easter storms may cross the threshold to be considered a large event, the broker said.

Infinz finalists

Auckland International Airport, Channel Infrastructure and Infratil are among the big names vying for gongs at the upcoming 2025 Infinz Awards.

The three companies are finalists in the New Zealand Equity Market Transaction of the Year category, along with their lead managers and underwriters.

It will be a hotly contested category. Auckland Airport’s $1.4 billion placement and retail offer is up against Infratil’s $1b placement and $275m retail offer, and Channel’s popular $50m accelerated renounceable entitlement offer, which was praised for its “fair and equitable” treatment of minority shareholders.

The awards, which aim to raise standards and reward innovation in the finance industry, will be held on Tuesday, May 13 at Shed 10 in Auckland.

As usual, the gala dinner will be rich networking for the banking, investment and corporate set, with around 750 guests expected.

There are 15 awards to be presented, with winners chosen by a panel of experts, including fund managers and equity analysts.

Infinz Fellowships will also be awarded, recognising Infinz members who have made a significant and valuable contribution to the industry.

For a full list of finalists, click go to: https://www.infinz.com/Site/INFINZAwards/,

The Business Herald will have full coverage of the winners following the event.

– Additional reporting Duncan Bridgeman.

Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.