KEY POINTS:
There are two questions kiwi investors should be asking themselves this morning.
First, are the stock market falls in China and then the US just a blip or the start of something deeper? And second, how much will any of this spread to New Zealand?
The first question won't be answered today and certainly not in New Zealand. Only when we've seen a couple more days trading in China and on Wall Street will we know whether this is the beginning of a rout.
As for the second, the New Zealand stock market tends to be a lot less volatile than other markets around the world.
Stocks here opened 3.2 per cent lower in the first few minutes of trading this morning, dragged down by Sky City and Telecom. This is likely to be a continued pattern if the fall continues over the coming days - more muted moves in New Zealand than offshore.
It goes without saying that the Chinese and New Zealand markets are very different beasts - yesterday's plunge illustrated just how different.
The 9 per cent fall in the Shanghai Composite Index fell was caused not by news, but by rumour. And it came after gains of 130 per cent last year and 14 per cent so far this year.
The New Zealand market has had a few good years of gains and is looking a little stretched, but is up nothing like China.
Investors can take some comfort in this - but not much. One of the main factors supporting the NZX-50 at its current levels are expectations of takeover activity, the hope that someone will come along and buy assets at inflated prices.
If the fall in offshore markets becomes deeper and more entrenched, then global investors' appetite for equities and risk will drop.
And with it, New Zealand shares.
* Christopher Niesche is business editor of the Herald.
