KEY POINTS:
Prospects for the New Zealand sharemarket remain sound despite some signs of weakening corporate profits last week, investment analysts say.
On Wednesday the NZSX-50 index hit another record, 4 per cent above the level it was on at the end of 2006.
But also last week came an announcement from whiteware manufacturer Fisher & Paykel Appliances, which downgraded its profit expectations by up to 20 per cent.
Lion Nathan warned conditions in New Zealand were increasingly difficult. And Freightways said it had managed to lift half year revenue 11 per cent, but net profit by only 1 per cent.
It had been operating in a tough business environment with rising costs, while activity among its customer base fell 1 per cent.
And while the NZ market has been far from alone in hitting a string of highs, elsewhere the economic news is brighter and there are concerns NZ is being seen as overvalued, compared with overseas markets.
Australia's benchmark index hit records on Tuesday and Wednesday and the US Dow Jones industrial average also reached a new high during the week.
AMP Capital Investors head of equities Guy Elliffe acknowledged there was an argument the sharemarket is "modestly overvalued" relative to global comparisons, but not enough to be too concerned.
His company sees a reasonable earnings risk in the near term, as a result of the value of the New Zealand dollar, and is also more nervous about the economy than others.
It has concerns about valuations and earnings, but neither to the extent that "it looks like a bubble waiting to burst".
"One of the interesting things is just how resilient business confidence has been given the strength in the dollar."
Confidence had rebounded in response to a fall in the dollar last year, and had then remained high despite the currency rebound.
Factors behind the continuing strength in confidence could include the domestic economy holding up relatively well.
But some exporters, particularly in the rural sector, were clearly under pressure, he said.
Arcus Investment Management chief economist Rozanna Wozniak said the outlook for the New Zealand sharemarket still looked "okay".
"But I think you would find that most fund managers are cautious in terms of expecting the kind of returns we've had to continue."
- NZPA
