Volatility expected to hit KiwiSaver balances

Stocks showing losses are displayed at the entrance to the New York Stock Exchange in New York...
Stocks showing losses are displayed at the entrance to the New York Stock Exchange in New York City yesterday. PHOTOS: REUTERS
KiwiSaver balances will be hit by market volatility caused by the conflict in eastern Europe, Dunedin sharebrokers say.

It comes as the New Zealand stock exchange regains some of its losses from Thursday’s plunge, but still remains down overall as uncertainty lingers.

Russia’s declaration of war on Ukraine sent an economic shockwave through global markets.

On Thursday afternoon, the NZX suffered its biggest single-day fall in nearly two years, sliding by more than 3%.

At the close of trade, the S&P/NZX50 Index slumped 400 points, or 3.3%, to 11,797 points — the lowest level since September 2020.

Yesterday, the index regained some ground opening up 2%, but by mid-afternoon it had weakened to trade up 1.2% on the morning’s start at 11,882.

Forsyth Barr investment adviser Suzanne Kinnaird said markets around the globe had already been pretty volatile leading into this week’s conflict for a range of reasons, including the brewing tensions.

People whose KiwiSavers were invested in equities — otherwise known as stocks — would probably see their balances move around as markets continued to react to the conflict.

"Markets are moving around and so will KiwiSaver balances," Ms Kinnaird said.

Craigs Investment Partners broker Peter McIntyre said some in the market had expected the invasion to happen, while others had thought it would not.

After the NZX plunged on Thursday, US markets also fell, and Mr McIntyre expected them to trade weaker again last night.

There had been a lot happening in markets at the start of this year, especially regarding interest rates, energy demand and global inflation, which was making for a complex environment.

The sanctions United States president Joe Biden had put on Russia might cause global economic growth to slow.

But with Mr Biden saying he had no intention to send US military over, Mr McIntyre believed the market would react well to that.

"If that’s the case, the market will take pretty well to that."

Mr McIntyre said events like the conflict happen from time to time which can shock the market and causes it to readjust.

Investors should be able to ride through it until the market settles down again.

"Next week, we should be able to see some certainty return to the market as we start to see where the conflict is heading."

Apart from Thursday’s drop, the NZX had had a strong week with good results, some companies increasing their profits and dividends, Mr McIntyre said.

The NZX50 closed at 11,953 points, up 1.86% on the start of the day.

Stock markets in the US opened at 2am New Zealand time and close about 10am.

 - Brewer Carlsberg, Japan Tobacco and a Coca-Cola bottler were among firms shutting factories in Ukraine yesterday following Russia’s invasion, while UPS and FedEx Corp suspended services in and out of the country.

Ukraine closed its airspace as Russian forces attacked, leaving budget airline Wizz Air trying to evacuate its Ukrainian-based crew, their families and four planes stuck in Kyiv and Lviv.

Many companies with exposure to Russia are waiting for more clarity on Western sanctions and assessing the impact of those already announced.

Washington yesterday announced a wave of measures that impede Russia’s ability to do business in major currencies along with sanctions against banks and state-owned enterprises. — Additional reporting Reuters


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