It's hard to believe that at the start of the year analysts and managers were picking New Zealand assets as being one of the sectors which would outperform this year.
Currently AMP is the only bright light in an otherwise gloomy market which is being buffeted by high short-term interest rates, a falling dollar, a ballooning current account deficit and a weak sharemarket.
BNZ Investment Management manager of investment strategy Michael Daly says things were looking reasonably positive a fortnight ago when banks started lowering their floating mortgage rates and the weakness in the dollar was about to reverse.
The trigger for the sudden turnaround was ratings agency Moodys signalling it was going to downgrade the New Zealand government's foreign currency debt and deposits.
He says all Moodys did was attract attention to the size of the current account deficit which had been known about for some time.
His view is that the negative sentiment is being overdone and will delay the onset of more positive conditions.
"The recent turn of event will delay the expected onset of outperformance by New Zealand financial assets over their offshore equivalents. For the time being offshore equities and fixed interest investment returns in New Zealand dollar terms should be boosted by the weak New Zealand dollar," Daly says.
He says New Zealand assets are expected to pick up, probably in the fourth quarter, as long as the current account deficit doesn't deteriorate, and companies still have earnings growth.
The key date for getting a fix on things will be June 24 when the latest current account figures are released. Daly says if the deficit exceeds 9 per cent of GDP there will be trouble.
Daly's views are shared by WestpacTrust's David Beattie. He considers the New Zealand sharemarket is between 20 per cent and 25 per cent undervalued at present, and there are good buying opportunities emerging.
"We are dipping our toes in the water," he says.
It's hard to believe that at the start of the year analysts and managers were picking New Zealand assets as being one of the sectors which would outperform this year.