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NZ equities now seen as undervalued

Fuseworks Media
Fuseworks Media

New Zealand equities have been revalued by the country's key investment managers, according to the latest New Zealand investment manager outlook by US-based fund manager and investment advisor Russell Investments.

New Zealand investment managers now believe domestic equities are undervalued, according to the report conducted in late September -- a change from the previous quarter when they were considered fairly valued. That was despite a 7.5 percent rise in the market during the quarter.

Company balance sheets were strong and costs were being contained, and companies were undervalued on a technical basis.

The seven investment managers who responded to the survey were also bullish about international equities, in line with US investment managers.

In contrast, New Zealand managers were increasingly pessimistic about domestic and international bonds.

Strong growth was expected over the next year, albeit from a very low base, with an economic boost expected from the Rugby World Cup and tax cuts.

However, the Canterbury earthquake, the Southland snow storm and lower trading partner growth were expected to dampen local growth.

Companies involved in building, infrastructure, freight and ports should benefit from the aftermath of the earthquake, while tourism and retail would suffer over the near term.

"The consensus from managers was that the currency, New Zealand fixed interest and equity markets and even GDP are more affected by global issues at the moment and the earthquake is really a small distraction from bigger global issues," according to the report.

One manager noted that the New Zealand risk premium on debt may rise if the government spending on earthquake-related projects appeared to be too high.

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