Punters display optimism about New Zealand shares

Friday 26th January 2001

By Chris Hutching

Brokers and investment fund managers were relieved Reserve Bank governor Don Brash held benchmark rates at 6.5% - giving rise to renewed confidence about equities.

Guardian Trust Funds Management managing director Anthony Quirk echoed the generally optimistic view for local shares but was also mindful of the threat of a slowdown in the US economy. "I think sentiment has turned here and overseas we'll probably know by the middle of the year if the risk from the US economy slowdown will have a big effect," Mr Quirk said.

"If they keep cutting interest rates in the US and it doesn't have any effect it would be negative. Bond markets and equity markets are telling us two different things at the moment and one of them is to expect to take a correction," Mr Quirk said

Don Turkington of Cavill White Securities recalled other years when New Zealand shares had staged a good rebound in January but felt the Reserve Bank's latest action was in keeping with a promising investment environment for shares. "The firming currency - 10% up this year - was also crucial in attracting overseas money back to the market after offshore investors suffered the double whammy last year of a soft market and falling New Zealand dollar. Share investors appear to be taking advantage of bargains at the moment and helping drive the bounce back. Technology was never a big sector here and it was savaged but I see that Advantage Group has enjoyed a bit of a recovery."

One stock picker who has a lot riding on the New Zealand market is fund manager Carmel Fisher, who runs the New Zealand Growth Fund, which last year returned 15.9% compared with the NZSE40 gross index fall of 8%. "It still depends on doing your homework and specific stock selection. I don't go by sectors.

"For example, I'm not a great fan of the technology sector. It could be a passing fad but there are one of two companies worth looking at. Telecom has seen resurgence but largely on the back of positive sentiment about telcos internationally. I don't even invest in Telecom.

Ms Fisher said she was reviewing the relatively narrow range of mid-cap stocks held in her fund.

Craig Stobo at BT Funds Management said the general economic outlook for New Zealand's primary economy was looking good after two healthy seasons with good profit growth for some companies. The balance of payments was improving and the Reserve Bank was holding interest rates steady. By contrast US growth was expected to slip from level about 4% to 2-3%.

Mr Stobo believes the next 12 months may provide a window of opportunity for the New Zealand sharemarket and the main challenge for fund managers will be to manage the effects of a rising currency.

ASB's New Zealand manager institutional business Richard Flynn emphasised the need for funds managers to focus on the quality of operational earnings rather than clever accounting. ASB Securities broker Tim Preston said he was also telling clients he believed the New Zealand sharemarket would outperform overseas bourses.

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