Economic growth rate could put squeeze on NZ shares

Market attention will turn to Thursday's GDP figure and its effect on the country's listed companies, with some brokers tipping pressure on share prices.

First NZ Capital strategist Jason Wong has highlighted the strong link between "relative equity market performance and relative GDP growth".

New Zealand equities had performed in line for the past 2 1/2 years against a fully-hedged global equity benchmark, reflecting convergence of economic growth rates between NZ and the rest of the world, he said.

"Our GDP projections suggest that the NZ economy is on the verge of underperforming its major trading partners and this lagging economic performance suggests a high chance of NZ equities underperforming fully-hedged global equities."

Medium-term "there is significant downside risk to the New Zealand dollar, and thus the likely underperformance of NZ equities is likely to be even more pronounced when considered against an unhedged global benchmark", said Wong.

Others in the market also think the time is ripe for local shares to come under some pressure.

"There's a lot of profit in the market and it could fall as people take it," one broker said.

"The interest rate rise has hurt things. Anything where there's a lot of profit is under threat - because there's no buying support sellers have to come down to meet the buyers and there are a few signs of panic."

Another broker commented that higher interest rates combined with overseas jitters were putting pressure on some stocks.

"We've been putting a little bit of a caution on the market since November. Certainly the feedback in the market is that players are finding it hard to find value.

"But nobody wants to sell too aggressively into it because then where do they put the money?"

Speaking at the FundSource annual conference on Friday, Brook Asset Management's Paul Glass was similarly bearish - although he offered some comfort to those concerned that this year's election might unsettle things.

"As long as a lunatic fringe doesn't get close to the lever", he said, the market was unlikely to be too unsettled.