Shares dip on global woes
The New Zealand stockmarket has taken a hit this morning after a drop in global markets since the Federal Reserve announced it would start tapering its bond-buying programme this year.
The NZX 50 was down 57.647 points, or 1.3 per cent, to 4340.874 shortly after 11am.
United States stocks experienced their worst day since 2011 on Thursday.
While the greenback rose on the back of the news, bonds and gold sold off sharply for a second day in reaction to the United States central bank's announcement.
The Standard & Poor's 500 index dropped 2.5 per cent, with Asian, European, and Australian markets also feeling the pressure.
In an announcement made yesterday morning (NZ time) the Federal Reserve signalled it would begin withdrawing its US$85 billion (NZ$109.7b) a month bond-buying programme this year as the economy improves.
"The committee sees the downside risks to the outlook for the economy and the labour market as having diminished since the fall," the Federal Reserve said.
Craigs Investment Partners adviser Stuart Hardie said while the announcement meant the US economy had got itself "into shape", the market was taking the tapering of the quantitative easing programme as bad news.
When markets have a strong run, as they had done for the past year, investors were looking for any excuse to take profits, he said.
"Markets can't go straight up forever, they need to come back down at some point."
Equity markets were likely to be volatile during the next three months, after such a good run, he said.
Poor Chinese manufacturing data for May added to the downturn in markets, Hardie said.
Increasing talk of a Chinese credit bubble had people on edge, and might contribute to further volatility in the market, he said.
Despite today's drop, Hardie said the local bourse was still an attractive option for people who wanted to expand their investment portfolio, and take advantage of New Zealand companies' healthy dividend payouts.
The only two stocks gaining shortly after 11am belonged to Telecom and Property for Industry.
Property for Industry is currently collecting votes from shareholders on the proposed merger of Property for Industry and Direct Property Fund.