Trauma of 1987 crash took long time to heal

The 1987 sharemarket crash changed attitudes towards investing in shares but younger generations have moved on since, say experts.

Thursday marks 30 years since the New Zealand sharemarket’s darkest day, when investors were wiped out as company values plummeted.

“I have very little doubt that crash and the aftermath of the crash had a big impact . . . particularly on my generation,” said Rob Cameron, an investment banker who was in his 30s at the time.

Some people were permanently put off shares, while others lost large chunks of their assets in the crash, Cameron said. But other investors who were hit had since returned to the market and younger generations had a different view.

“I think the attitude is totally different today. With time there has been a change in the composition of the population. The younger generation is nowhere near as traumatised.”

Personal finance expert and Weekend Herald columnist Mary Holm, who was business editor of the Auckland Sun at the time, said anecdotal evidence certainly pointed to people being put off shares after the crash.

“We are very underinvested in shares compared to other Western countries. The crash affected us more than other countries.”

Holm still heard stories of people being talked out of buying shares by their grandparents.

“Everyone says that is why rental property is popular now.”

One difference between then and now was a lot of people borrowed money to invest in shares. Another feature of the time was share clubs.

“Everybody was in them. That was very much part of the social scene.”

Holm said she had a bit of money in shares but took it out ahead of the crash to buy a house in St Heliers only to find when she sold it two years later that property in blue chip suburbs had dropped by 30 per cent.

“We thought we were lucky . . . and then we weren’t.”

Robert MacCulloch, an economist at the University of Auckland, said overseas research showed if you grew up during a major economic catastrophe you were likely to be affected for life.

MacCulloch, who graduated from university at the time of the 1987 crash, said those most likely to be affected would have been in their formative years — aged 18 to 25 at the time and in their 50s and 60s now.

Many of his friends had expected to get jobs in the sharebroking firms where their parents worked but by the time they finished university a lot of those firms were bankrupt.

MacCulloch does not own any shares. “You think, ‘ Oh gosh, is that going to happen again?’”

But Rue Bourke, a wealth management adviser at First NZ Capital, said there was a lot of speculative money in the market at the time and today’s market was very different.

People who invested now were much more cautious about where they put their money.

“I suppose it did frighten people away from the markets for a few years.”

In the 80s there were high interest rates and a very speculative sharemarket, whereas today there were low interest rates and people were investing in shares for their dividends, Bourke said. “It is a totally different environment now.”