by Rob Hosking
The NZSE40, when averaged out, has grown a compound 11% since 1990, if the index is equally weighted, he says.
"It's become fashionable to beat up on the NZSE40, but what has happened is there has been growth in the smaller companies, but the larger firms have done badly."
Carter Holt Harvey, Brierley Investment and Fletcher Challenge made up 60% of the value of the market over that period, and all three companies were in trouble over that time.
"They tended to take the market down, so that the NZSE at roughly the same level it was in 1994 in terms of overall value."
The other large firm, Telecom, grew considerably over that time but is now in the doldrums, with its share price dropping below $5 for the first time this week.
"That's reflective of the global unpopularity of telecommunications stocks." In the past, Telecom has been a bellwether for the New Zealand market, but since its move into Australia in 1999 its share price has tended to more reflect the market mood about the telecommunications sector as a whole.
The comments came as part of AMP Henderson's quarterly results, which reflected something of a change in market mood.
The past couple of quarters have seen global stocks in freefall, and a rally in bond markets but the market began to stabilise around mid-April, he said. The company's investment performance over the year ended 30 June showed a 4.1% increase in the gross performance of the company's low risk funds, 1% for the medium risk and -4.9% for the high risk funds.
Over the June quarter though the low risk performance was 2%, medium 3.5% and high risk 4%.
The company's outlook for markets is over coming months is broadly neutral, he said.
"We've seen the most synchronised interest rate easing around the world we've seen for some time, and lower interest rates are always good for sharemarkets. But we've just come to the end of a very long bull market and a period of some pain and indigestion is not unknown when that occurs. That's what we think is happening now." It was not clear how long this period would last, he said.
With about 1400-odd US companies due to report their second quarter earnings in a few weeks time, some indication could be provided, AMP's senior equity portfolio manager Craig Brown said. However there were signs of an Australian recovery.
"The
latest building sector statistics form Australia were quite good,
and that's a pretty positive sign for us."
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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