New Zealand Investment Risks

New Zealand is a small but very interesting market. As an investor who is used to larger markets such as North America, Europe or Japan, you should be aware of the particular characteristics of New Zealand for financial investements.

New Zealand is a small country and as a consequence has a small economy. This means that market sentiments and movements that may not even be noticable in markets like Great Britain or Germany can have a significant impact on the New Zealand finanical market.

For instance if the global markets believe that the Reserve Bank of New Zealand (RBNZ) will reduce the rates, e.g. the official cash rate (OCR), then this might reduce the value of kiwi dollar. The change in value may be not only a tenth of a percentage point. Two percent in a single day are nothing out of the ordinary. So investors need to be prepared of more significant changes.

If you invest through an investment fund be aware of the size of the investment fund in relation to the market it is active in. E.g. there are days where the volume of all trading on the NZX (basically equal to the New Zealand stock exchange) is NZD 100 million. There are funds that have reached a size of NZD 300 million. Any non-negligable trading by this funds can influence the quote of a particular company.