KEY POINTS:
The New Zealand and Australian sharemarkets fell heavily again today, extending its longest consecutive losing streak in seven years.
The benchmark NZSX-50 index ended down 1.5 percent today, the 10th day on end it has fallen and the longest negative stretch since December 2000, when calculations for that index began.
Analysts say both institutional and retail investors are timid about investing while Wall St continued to reflect growing evidence the United States was headed for recession.
ASB head of sales Andrew Kelliher in NZ said sellers were not being discerning.
"Everything is getting sold, even the good stocks out there," he told Newstalk ZB.
In Australia, stocks also tumbled the moment trading opened.
Australian stocks fell more than 2 per cent in the first 45 minutes of trading.
The benchmark S&P/ASX 200 Index was down 146.6 points, or 2.46 per cent, at 5813.4 after the first 20 minutes of trade, off an earlier low of 5791.2.
The Hong Kong market was also hit hard, with blue chip stocks down 4.2 per cent.
The benchmark Hang Seng Index was at 24,748.12 at 0255 GMT.
Analysts say both institutional and retail investors are timid about investing while Wall St continued to reflect growing evidence the United States was headed for recession.
But there were hopes the reporting "season" which begins at the end of the month may break the drought of company news and convince investors local firms are performing solidly.
However, ANZ chief economist Cameron Bagrie was doubtful the local sharemarket would rebound soon.
He said apart from ripple effects from overseas, New Zealand faced strong inflationary headwinds and resultant high interest rates.
"The big economic barometer that worries me is inflation, and the only way you're going to get inflation down is we're going to end up going through a period of slow growth.
"The Reserve Bank is going to win, and a byproduct of that is, it is going to be a tougher environment on the earnings front."
Mr Bagrie said a correction in the sharemarket was likely as New Zealand equities were looking expensive relative to other markets.
"We've had three to five years of exceptional earnings growth and exceptional returns. So you're following that sort of period, maybe a sideways movement for six months isn't such a bad thing.
"Long-term, I think the prognosis for New Zealand economy equity market in general is very good but ...if you think about it, you can get nine per cent down at the bank at the moment.
"In a cyclical sense the hurdle rate for investing in equities looks pretty high."
In New Zealand, the benchmark NZSX-50 index is now down 13 per cent since early October.
Other sharemarkets have also had poor starts to 2008. Australia's benchmark share index is down 14 per cent since November and off 2.2 per cent this afternoon, its eighth straight day of declines.
Japan's Nikkei was down 2.5 per cent early this afternoon to hit a 26 month low, and Wall St's blue-chip Dow Jones Industrial Average index last night tumbled 2.2 per cent after a record quarterly loss at US bank Citigroup and a drop in December retail sales.
The Dow Jones was now at its lowest level since April last year.
Analysts feared that fallout from the international credit crisis would push the US economy into recession, and stymie growth in China and the rest of Asia, as well as Europe.
While the sharemarket was looking miserable, the New Zealand dollar has remained very strong despite international investors lumping it in with equities as a "risk asset".
It had firmed on the back of its attractive interest rate yield and US dollar weakness.
The gap between New Zealand and US interest rates has been accentuated by expectations the US Federal Reserve will aggressively cut interest rates this month to stimulate its economy.
The kiwi was shaken today by the equity markets jitters, falling over one and a half cents to US77.5c after rising to a month high of US79.16c yesterday.
- NZPA, NZ HERALD STAFF