The New Zealand dollar and stock market plunged on Monday amid widespread fears about slowing global growth.
Nervous investors across the Asia-Pacific region dumped stocks after ratings agency Standard Poor's downgraded its US credit rating from AAA to AA+ on Friday and ongoing concerns about Europe's debt problems.
The NZX 50 index fell 91 points, or 2.8%, to close at 3185 on Monday on turnover of $128 million, with about $1.1 billion wiped off its value.
Stocks were down 3% in early trading. Despite regaining some lost ground, buyers were scarce and there was panic selling.
That theme was repeated elsewhere. After modest falls earlier in the day, Australia ended the day 2.9% down, while in Japan the benchmark Nikkei index was 2.2% lower.
Hong Kong's Hang Seng Index was 2.17% lower, while China's Shanghai Composite Index recorded its largest single-day loss since November last year, ending 3.79% down.
Shares began to dive globally on Friday, with trillions of dollars wiped off the value of markets. The NZX 50 lost 3% in its worst day of trading since 2009 following heavy losses on Wall Street.
Meanwhile, concern that the US recovery will stall has hit the New Zealand dollar which has fallen 6 cents since Friday. On Monday, it had shed 1.5 cents and at 7pm was buying US82.08 cents.
However, the interest rate on the Government's debt continued to fall, suggesting that some New Zealand assets remain in favour.
Foreign exchange adviser David Rankin believes the Kiwi should be relatively insulated from the debt crises in the US and Europe and expects it to rebound.
Mr Rankin says he does not expect a recession or depression to result from the economic uncertainty overseas.
SP warning for NZ exports
Standard Poor's warns the turmoil on world markets could have further negative fallout for New Zealand and export markets could be affected while banks are vulnerable to a shutdown in funding markets.
The international ratings agency says there are no immediate implications for the credit ratings of countries in the Asia-Pacific region.
However, it warns disruption to financial markets and slowing growth in the West could cause problems for some countries, including New Zealand.
It believes export earnings could be hit, while local banks' high reliance on foreign funding could create problems if the European debt crisis worsens.
Analyst Kyran Curry says New Zealand is among a handful of countries in the Asia-Pacific region that are vulnerable.
It is likely that New Zealand being an export-dependent sovereign may experience weaker support from its major trading partners that may impact on its medium-term growth outlook.
Mr Curry says the turmoil on world markets does not yet have any implications for New Zealand's AA+ credit rating.