NZX 50 sinks to month-low as Wall Street rout spooks local investors

See also: NZ shares decline but sell-off less severe than overseas

New Zealand's shares fell to their lowest level in a month as trading opened for the week after a rout on Wall Street triggered a sell-off by local investors nervous about the impact of cheap oil and a slowing Chinese economy.

The S&P/NZX 50 index sank 1.8%, or 113.19 points, to 6055.9 at 11.10am, the lowest level since Dec. 16. Within the index, 46 stocks fell, with just four unchanged.

Global investors have been spooked since the start of the year when Chinese equity markets started sinking and as a glut of oil supply pushed prices to 12-year lows, fuelling speculation central banks will have to reassess their tracks for inflation and raising the prospect for interest rates to stay low. Stocks on Wall Street continued to drop on Friday, with the S&P 500 index falling 2.2%, taking its decline this year to 8%.

Other stock markets have been even harder hit, with Hong Kong's Hang Seng index down 11% so far this year, Japan's Nikkei 225 index falling 9.9%, and China's Shanghai Composite index down 18%. New Zealand's NZX 50 is down 4.2% so far, while Australia's S&P/ASX 200 index is down 7.6% since the year started.

"It's starting to rattle one or two investors, particularly on Wall Street, on the back of the oil price and what's happening in China," said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch. "We're going through a correction and, while some markets have gone down 10%, which puts them into bear territory, we aren't there at this stage."

The NZX 50 rose 13% in 2015, its fourth year of double-digit growth, and isn't expected to repeat that kind of expansion for the fifth year in a row.

Williamson said trading at the start of the year doesn't typically correlate to a market's performance for the remainder of the year, and he anticipates the local market will calm down when companies start announcing earnings in the February reporting season.

General insurer Tower led the benchmark index lower, falling 6.1% to $1.76, while steel products distributor Steel & Tube Holdings slid 3.5% to $2.21, and milk marketer A2 Milk Co dropped 3.4% to $1.70.

(BusinessDesk)