AMP Capital Investors said yesterday the New Zealand sharemarket was fully valued but further potential takeover activity meant it was dangerous to be out of it.
"We are too scared to be short," head of equities Guy Elliffe said.
As well as the likelihood of more takeover activity
for the likes of Auckland Airport and at least one other major company, Elliffe said the market would get a boost from hundreds of millions of dollars coming in from KiwiSaver.
The valuation of Auckland Airport at about 20 times enterprise value and 40 times forecast earnings suggested some foreign investors had a different set of valuation assumptions. That had implications for other infrastructure assets, he told a briefing on the fund manager's quarterly performance.
Valuations investors would normally have trouble justifying were acceptable, he said.
However, with the kiwi nudging US80c, foreign investors were exposing themselves to a significant currency risk that could see them quit rapidly when the currency turned.
Although AMP Capital expects the NZ dollar to decline to US55c to US60c within three years, Elliffe does not expect a calamitous sharemarket reaction to a sharp currency fall provided the economy cranks along at a reasonable pace.
Head of investment strategy Leo Krippner expects global shares to continue to perform well and outperform the local market which is likely to be further curtailed by yet another interest rate hike next week.
Elliffe said the outlook for local sharemarket leader Telecom was uncertain because there was no clarity about the final model it would operate under or what pricing it would be forced to accept. Also, the strategy of the new management was not known.
- NZPA
