New investors giving NZ stock market a go as share prices dip due to Covid-19 pandemic

June 12, 2020

There’s been a strong run in recent weeks, with new investors entering the market, but that hit a wall today.

The NZX50 ended down 2.2 per cent today - its worst single day in six weeks - prompting financial advisers to urge first-time Kiwi investors to have an investment strategy.

Today’s 2.2 per cent drop followed an overnight plunge of the Dow Jones in the US, which closed down 7 per cent. Investors were rattled by slower-than-expected economic bounce-back and an increase in Covid-19 cases.

Early trading dropped the NZX as much as 4.5 per cent, with the day opening 3 per cent down.

Westpac chief economist Dominick Stephens said the market was correcting itself after a strong run in recent weeks. 

"There's also perhaps a sense that sharemarkets were getting a bit ahead of themselves with a pretty aggressive rise over the past couple of months.”

Tom Hartmann, managing director for the Commission for Financial Capability, said people should have a goal and timeframe in mind for their investment.

“The key thing is to have a strategy ... so that you do not need to react to every upswing or downswing in the market.”

He said people should expect to see higher highs and lower lows as the world approached a recession.

In March, as the Covid-19 pandemic caused stocks to crash at rates not seen since the 2008 Global Financial Crisis, people had been taking advantage of cheaper shares.

The New Zealand stock exchange saw record sales. In mid-April, more than 200,000 trades were made in a week, more than triple the rate the same time last year.

Online investment service Sharesies also saw a surge in demand since mid-March.

Co-founder Leighton Roberts said they onboarded 75,000 new investors.

“So with that comes much higher levels of trading volume and a lot of interest in New Zealand companies,” he said.

First-time investors are investing, on average, $3000 on shares. 

Mr Roberts said people were looking for places to put their money given bank savings rates remained low and house prices remained high.

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