An index tracking the performance of South Island-based companies has tumbled, as business confidence slips and investors keep hold of their cash.
The Deloitte South Island Index tracks 30 listed companies based in the South Island, including Ryman Healthcare, Kathmandu, PGG Wrightson, Silver Fern Farms and Pike River Coal.
The index grew strongly in the six months to March, but those gains have been wiped out in the three months to June, with the index falling by 3.9% - taking the total market capitalisation to $4.1 billion.
Biotechnology and development sectors grew slightly during the quarter, but market capitalisation in the financial and retail sectors fell by more than 15%.
Corporate finance partner Paul Munro attributes the drop to a recent fall in investor confidence.
Mr Munro expects growth to remain patchy as the economy recovers slowly and gradually.
He says the 3.9% decline in the South Island index was not as significant as the national trend - the NZX50 index fell more than 9% during the quarter.
Kathmandu, Pyne Gold Corporation and PGG Wrightson were the hardest-hit companies during the period.
However, New Zealand Windfarms, Pike River Coal, Skyline Enterprises, New Zealand Wool Services and Skellerup all bucked the trend, and increased their market capitalisations.