KEY POINTS:
New Zealand stocks have recovered after a dramatic plunge this morning.
World markets today slumped after overnight losses in Europe, but New Zealand shares bucked the trend by steadily improving from an early 4 per cent loss.
The top-50 still maintained its record-breaking run of 14 consecutive losses, but closed just down 1.1 per cent, or 39 points. It had been down nearly 150 points.
That compared with a 5.4 per cent fall on Australia's benchmark index in its afternoon session, extending its longest losing streak in a quarter of a century.
However, investors are eyeing United States markets tonight, which were closed on Monday for a holiday.
New Zealand shares were less volatile than others because their rise had not been as dramatic, and there was less margin trading done, using borrowed money which had to be repaid when shares fell a certain amount, said broker Chris Lee.
"The Australian market has had huge gains in the last four years, way greater than ours, and so it would be ridiculous if we fell more than them," Mr Lee said.
"It would imply that our companies are the ones that are rotten with too much borrowings and too many bad practices - that's not the truth."
It was rational for people who had borrowed money to buy shares to sell as the market declined, and repay debt.
"The problems are caused by people who unknowingly put money in fund managers who were punting in these markets, and the people whose money it was didn't realise the level of risk - and when they find out suddenly their investments are worth a lot less, they just say sell up," Mr Lee said.
He expected markets to continue declining, although it was impossible to tell if it would be for six months or a year or longer.
"I would think that probably at the end of this year, people will remember some of the share prices from December as being a dream from the past."
Blue chip Fletcher Building has fallen from last year's record high above $13, but at $9.95 it is well above the $4 four years ago, and it remained a solid company along with many others.
Margin lending and other practices flourished when markets had several good years in a row, and eventually investors began to believe the rules had changed and prices could only rise, Mr Lee said.
The New Zealand index's darkest day was on September 12, 2001 when it shed 5 per cent, or 93 points. It has had 10 worse sessions than its poorest one so far this year, Friday's 1.76 per cent decline.
The market is now down 19 per cent off its last peak in early October.
"The mood is pretty sombre but I don't think anyone is jumping out of the building," said First NZ Capital broker Malcolm Davie. "It's following global sentiment, nothing more than that."
Stocks around the world went into freefall overnight, with investors bailing into safe-haven bonds and currencies amid fear a deteriorating US economy will drag others down with it.
Today, Asian share markets fell around 5 per cent, while industrial metals, such as zinc and copper plunged and oil fell well below recent record highs.
"It's like a funeral in here," said Ken Masuda, senior equities dealer at Shinko Securities in Tokyo. "No one knows what's going to happen tonight in New York. It's like we've gone blind, you don't know what's coming.
"Until we see New York, all we can do is sell," he said.
As a result of investors' flight from risky assets, the New Zealand dollar's slide against the greenback accelerated to a four-month low today. From around US76c at yesterday's local close, the kiwi fell to US74.5c, shedding 6 per cent in value in just over a week.
- NZPA