All eyes from the world's tumultuous financial markets, including New Zealand's, are on the fortunes of insurance behemoth American International Group.
The United States insurer's credit ratings were cut, heightening concerns it might file for bankruptcy and cause more turmoil in global markets.
AIG is the latest company to be convulsed by a mortgage and credit crisis that this week led to a bankruptcy filing by Lehman Brothers Holdings and the sale of Merrill Lynch & Co to Bank of America Corp.
AIG has suffered $US18 billion ($NZ28.1b) of losses in the past three quarters tied to guarantees it wrote on mortgage-linked derivatives.
It ended June with $US1.05 trillion of assets. Its failure would likely be larger than that of Lehman, which said it ended August with $US600 billion of assets.
Meanwhile, the US Federal Reserve held its base lending rate at 2.0 percent, saying the US economy was likely to achieve "moderate" growth over time despite the current financial turmoil.
The unanimous decision by the Federal Open Market Committee (FOMC) defied expectations of traders in the futures market of a quarter-point cut in the federal funds rate.
In this country, Grant Williamson of sharebrokers Hamilton, Hinden, Greene told Radio New Zealand today that local investors were being cautious.
"All eyes will be on the US and what happens with AIG," he said.
Yesterday the New Zealand sharemarket, which ended the day down 2.8 percent, had seen some large selling by foreign investors.
There was still "quite a bit" of downside regarding foreign investors getting out of New Zealand companies, particularly the larger companies including Telecom and Fletcher Building, which still had large foreign holdings.
"The good news here is that most of our major companies are not overweight with debt. That's the dirty word at the moment -- too much debt," Mr Williamson said.
The New Zealand market was reasonably well positioned compared to many of its overseas counterparts, and fundamentals would eventually come into play as some stocks became too undervalued.
Radio NZ reported AIG had 7 percent of the insurance market in this country and 45,000 customers here. Its New Zealand office said it was separate from the US headquarters and policy holders had nothing to fear.
New Zealand Insurance Brokers Association chief executive Gary Young said it was probably unlikely AIG would want to take any money out of its operation in this country.
New Zealand was "very tiny" compared to the global scene and the amount of money the company could get from this country would be irrelevant, he said.
Also regulations required insurance companies to hold a certain amount of capital to cover their potential claims.
AIG tended to be involved in the corporate and commercial area in this country, Mr Young said.
It was unusual to have an insurance company that was so big that it dealt in other areas of the financial market, as AIG did.
Insurers in New Zealand were not involved in that way and so he would not expect them to be affected in the same way.
