Active management tipped as key in 2016

Another strong performance from New Zealand equities is expected in 2016 but some commentators say it will be more of a stock-picker’s market this year.

Tuesday, January 5th 2016, 6:00AM 1 Comment

by Susan Edmunds

The NZX finished 2015 13.5% up on the same time in 2014. It follows three years of 20%-plus returns.

Mark Lister, of Craigs Investment Partners, said he expected this year to be another strong one, although he said it was likely the local market would produce a percentage return in the mid-to-high single digits, rather than stretching into double digits again.

“Strong gains will be harder to come by,” he said.

“The economy is still in good shape, better than most, interest rates are at record lows and the currency has a bit further to fall. Companies are in good shape and the dividend yields are attractive. There’s every chance it will be another positive year but I don’t think it will be as strong as this year.”

He expected it would be a more tumultuous year, with more market uncertainty.

Investment adviser Grant Davies, of Hamilton Hindin Greene, said interest rates were likely to drop further through 2016, which would drive more investors to look for yield. Margins on bonds were being pushed down by high demand, he said.

“A lot of my clients are retiring age and traditionally they would have been quite happy to take the bank deposit rates and have budgeted on being able to do that but they’re being forced to look elsewhere.”

Davies said he would be surprised if the NZX was as strong in 2016 as it had been in 2015 and said investor returns would likely vary according to individual companies’ performance. "It will come down to the individual companies people are invested in and whether they can grow their earnings."

He said helping clients manage their exposure to risk would be a major part of his job this year.

Milford Asset Management’s Anthony Quirk was also optimistic. He said the economy was healthy despite the fall in dairy prices and firms had reported a particularly strong second half of 2015.

But, like Davies, he said equities' fortunes could be mixed. He said 2016 was likely to be a stock-picker’s market. “A lot of companies are pretty fully valued.”

Quirk said there were also pockets of opportunity in Australia, even though it was in a more challenging economic environment.

John Berry, of Pathfinder, was also positive about global markets. He picked most opportunity in Europe where he has shares were valued reasonably and there was growth happening. He said tech stocks appealed globally. “The US technology market is growing in terms of sales at two-and-a-half times the rate of the wider economy.”

He predicted the Kiwi dollar could fall against the US to the low 60c range.

Tags: equities NZX