In its latest annual snapshot of the equity market, investment firm JB Were says foreigners' holdings fell from 38% to 36%, while retail investors and local managed funds lifted their shares.
JB Were strategist Bernard Doyle says the change reflects, in part, greater local savings being poured in by the New Zealand Superannuation Fund.
But Mr Doyle says it also highlights dwindling foreign interest in the country's stockmarket due to a lack of quality firms.
Offshore firms do have a strong presence in some sectors, such as banking, while the country's top stocks, like Telecom, Fletcher Building and Contact, continue to have substantial overseas ownership.
Mr Doyle says tax changes to boost the productive sector and Capital Market Development Taskforce recommendations to sell stakes in state-owned enterprises will boost local ownership.