Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


NZ shares still have distance to climb, says Milford

NZ shares still have distance to climb, says Milford

Jan 30 (BusinessDesk) - Fears the New Zealand sharemarket is becoming over-valued as it continues last year's run into the new year are over-stated, and the market is "far from frothy", says Milford Assets portfolio manager Mark Warminger.

Writing in the fund manager's blog, Warminger says the last few years have been tough for corporate earnings and that even though analysts know earnings have stabilised, they are too reluctant to forecast improved profits as the six monthly earnings reporting season looms next month.

"We believe that earnings are likely to exceed expectations over the next year as the economic recovery continues and gains pace," he writes. If that happens, what looks at present like a high average price/earnings ratio for New Zealand shares of around 15.5 times will be somewhat lower.

The average PE ratio for the market over the last decade has been 14.7 times.
"Analysing another valuation metric would suggest the New Zealand equity market is currently fair value on a dividend-yield basis, with the current prospective dividend yield equal to its 20 year average.

"Comparing the equity market dividend yield to current government bond yields would suggest the New Zealand equity market is cheap," Warminger argues, and applies the same logic to other metrics such as equity risk premium and discounted cash flows.

"The current investment climate of low interest rates, low but stable growth and most valuation metrics showing no signs of frothiness argues well for continued gains as earnings improve and the PE multiple expands to reflect the current environment."

Fears of an overheated local equities market followed last year's 25 percent rise in the NZX50 Index of leading stocks, with the rise continuing in the early part of this year.

The NZX50 briefly hit a five year high point of 4,2204.407 on Monday, in very light trade affected by Auckland and Australia anniversary weekends.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Land & Water Forum: Fourth Report On Water Management

The Land and Water Forum (LWF) today published its fourth report, outlining 60 new consensus recommendations for how New Zealand should improve its management of fresh water and calling on the Government to urgently adopt all of its recommendations from earlier reports. More>>



Welcome Home: Record High Migration Stokes 41-Year High Population Growth

New Zealand annual net migration hit a new high in October as more people arrived from than departed for Australia for the first time in more than 20 years. More>>


Citizens' Advice Bureau: Report Shows Desperate Housing Situation Throughout NZ

CAB's in-depth analysis of over 2000 client enquiries about emergency accommodation shows vulnerable families, pregnant women and children living in cars and garages, even after seeking assistance from the Ministry of Social Development and Housing New Zealand. More>>


Speaking For The Bees: Greens Call For Neonicotinoid Pesticide Ban

The National Government should ban the use of controversial pesticides called neonicotinoids after evidence has revealed that even at low doses they cause harm to bee populations, the Green Party said today. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news