NZX benchmark hits record high

Another golden year for local equities as favourable economic conditions drive 17 per cent rise in index

The benchmark NZX 50 Index hit its highest point yesterday and has risen by 17 per cent in 2014, marking another golden year for local equities.

Low inflation, low interest rates, robust economic growth and a host of new issues have driven a surge in the sharemarket, which gained 16.5 per cent in 2013.

Since March 2009 - the depths of the global financial crisis - share prices have more than doubled, the index rising by 125 per cent to yesterday's 5552.1 closing level.

The total market capitalisation of the market, relative to the country's gross domestic product at the end of November 2014, was 41.1 per cent compared with 37.8 per cent at the end of 2013, according to NZX data.

Initial public offer activity during the year resulted in total new capital listed this year to date of $6.6 billion, while 165 capital raisings from existing NZX-listed stocks raised $1.7 billion.

"It's been a huge year for the market, with the NZX 50 up 17 per cent, and with a significant number of new initial public offers," said Salt Funds Management managing director Matt Goodson.

Fund managers said the market might have become fully priced after a string of strong years and Goodson said he would be surprised to see the market repeat this year's performance in 2015.

Shane Solly, portfolio manager and research analyst at Harbour Asset Management, said the New Zealand market had "ticked a lot of boxes" for investors over the past few years.

"The relative strength of the New Zealand economy and New Zealand businesses has contributed to earnings certainty and relatively high dividends which has been attractive to local and global investors alike," Solly said. The outlook for next year remained relatively positive for New Zealand equities but there were risks, he said.

"We expect global economic activity to continue lifting higher, and lower oil prices ought to provide a boost to near-term business and consumer confidence."

The flip side to lower oil prices would be how it affected the major oil producers - Russia in particular - and the possible contagion that could arise if the economic situation there worsened.

Whether companies met market expectations for earnings would be a large influence on the performance of the market, Solly said, adding an underperforming Australian market might cloud the outlook for New Zealand stocks with exposure across the Tasman.