Shares fair value, say half of NZ fund managers

Photo / Kenny Rodger.

Half of leading portfolio managers think New Zealand shares are fairly valued, up from 25 per cent in the June quarter and none the quarter before that, survey results show.

Russell Investments' investment manager outlook survey for the September quarter also found 40 per cent of managers in this country still considered the New Zealand equity market to be undervalued.

The sharemarket's benchmark NZX-50 index is around year-high levels, having climbed from a low near 2410 points in March to near 3170 at the end of September.

The view in this country was consistent with that of Australian portfolio managers, Russell said today.

The September quarter Russell outlook in Australia found 65 per cent of local portfolio managers bullish to Australian shares, with not one respondent thinking local shares were overvalued.

Industrials topped the list with 69 per cent of Australian managers expecting an upswing in that sector in the next 12 months. Even retail was backed by nearly three quarters of managers, Russell said.

But the Australian managers were not so keen on defensive stocks like utilities and telcos.

Global equities were attractive to both New Zealand and Australian managers, in keeping with the view of their colleagues in the United States who responded to Russell's US survey.

The US managers were bullish to emerging market equities and non-US developed market equities.

In contrast, less risky asset classes such as domestic bonds drew more of a mixed response from managers in the three markets.

Russell NZ's senior manager investment consulting Alister Van der Maas said it was not surprising in New Zealand, given the heavy weighting in New Zealand bond portfolios to government debt. But New Zealand investment managers were less bearish to global bonds.

That reflected the larger opportunity available globally in credit and high yield debt securities, said Van der Maas.

Managers in this country had also factored in an increase in the equity risk premium across all geographic locations for the next three years. Beyond that, managers had factored in a reduction back towards, but slightly above, its pre-crisis level.

That indicated that managers expected the return for investing in global equity markets in coming years to be slightly higher than the level that was expected before this financial crisis.

Van der Maas said all the New Zealand managers saw stronger economic growth in the next quarter.

But several managers expressed concern about the impact of a high NZ dollar on growth although one thought that other sectors of the economy would likely improve as a result of the current low interest rate environment.

- NZPA