Forum Archive Index - March 2001

["Peter Maiden" <pmaiden@xtra.co.nz>]

From Today's Sunday Star Times:  JP Morgan analyst Arthur Lim described the NZSE40 as the star performer of the world markets. In contrast to sentiment in mid-2000, New Zealand was now a much easier story to sell to overseas investors, he said. "Last year we were just cheap, but cheap doesn't necessarily mean good. The takeover activities have crystallised some significant gains for offshore investors. So now we're still looking cheap but they can see an upside," he said.

So just how is the New Zealand market valued currently?  Some facts -

 

 

                                Current P/E        Year ago        10 Year Average

 

NZ                            15                    15                        23

Australia                   20                    22                        19

USA                          27                    30                        22

UK                            24                    26                        18

 

 

New Zealand market is trading well below it's 10 year average - but on it's way up. The rest of the world are coming off a recent highs and trending down towards 10 year averages.

 

The hard realisation that expected earnings that caused the relatively high P/Es are not going to come to fruition makes the gap between current P/E levels and traditional levels even greater than shown in the table.

 

There is still a lot of 'over valuation' in the world markets. Judged on recent earnings trends there is significant downsides that still need to fall out as these markets adjust to valuations that better reflect reality.

 

Maybe New Zealand is not such a bad place after all.

 

Cheers

 

Peter