25 Aug 2015

NZ market falls again amid China fears

4:54 pm on 25 August 2015

New Zealand's sharemarket has suffered its biggest two-day fall in four years, as investors' attention stays on the Chinese economy.

World markets reacted with panic yesterday after a near 9 percent dive in China shares and a sharp drop in the US dollar and major commodities.

A trader on the floor of the New York Stock Exchange on Monday.

A trader on the floor of the New York Stock Exchange on Monday. Photo: AFP

The NZX Top 50 index has traded for a second consecutive day in the red and at midday, was down 112 points, or 2 percent, to 5495.

New Zealand's market opened more than 2 percent lower this morning, following yesterday's 2.5 percent fall in the NZX, as global investors worried about growth in the world's second largest economy.

Westpac's currency strategist Imre Speizer said Monday and Tuesday's drops marked the biggest two-day fall since August 2011.

Meanwhile, he said the New Zealand dollar had fallen to a six-year low against its United States' counterpart.

Finance Minister Bill English said volatility on international stock markets was a bit concerning for New Zealand, but he was waiting to see whether it has any direct impact on the economy.

Mr English said it may be come before any direct effect on the New Zealand economy becomes apparent.

"The key issue for us how that flows into the real economy, so does a drop in the Chinese sharemarket change the willingness of Chinese consumers to buy our products.

"Or does it change the impact of Chinese growth on Australia - which is still our biggest trading partner."

Mr English said these types of international events were not helpful when the economy was already softening, but the Government's role was to ensure ongoing stability and adaptability.

The Employers and Manufacturers Association's chief executive Kim Campbell said New Zealand's economy was doing well, so people should not be scared of the global share drops.

Mr Campbell said New Zealand currently had a competitive exchange rate and very industrious export businesses.

Global markets take hit

In the United States, overnight share trading on Wall Street was down, with the Dow Jones closing nearly 4 percent lower. European stocks had closed off 5.4 percent and Asian shares slumped to three-year lows. The Australian sharemarket suffered its worst day of losses since the global financial crisis as $A64 billion was wiped off share values.

An investor at a trading hall of a securities firm in Nanjing, China,  Aug. 24, 2015.

An investor in the offices of a security firm in Nanjing, China. Photo: AFP

China's central bank devalued the country's currency, the yuan, two weeks ago, raising fresh concerns that a slowdown in the country's economy was worse than originally feared.

Over the past week, the Shanghai index fell 12 percent adding up to a 30 percent drop since the middle of June.

Investors have been watching China's central bank for signs it will reduce interest rates and inject some consumer confidence into the markets.

Beijing's latest intervention, to allow its main state pension fund to invest in the stock market, failed to calm traders' fears, both in China and abroad.

Currencies and commodities are also falling sharply, because those markets rely heavily on strong demand from China.

A trader on the floor of the New York Stock Exchange as the global economy continues to react from events in China, on what is being called Black Monday, August 24, 2015.

The Dow Jones closed 4 percent down on Monday as the market continued to react to events in China. Photo: AFP

A trader on the floor of the New York Stock Exchange as the global economy continues to react from events in China.

Photo: AFP

- BBC / ABC / Reuters / RNZ

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