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More volatility to come

New Zealand's equity market has not yet dropped enough to find much value and may weather a stock market storm this year without too much trouble, commentators say.

Wednesday, January 27th 2016, 6:00AM

by Susan Edmunds

Mark Lister, of Craigs Investment Partners, said the New Zealand market had not fallen significantly through recent international equities turbulence.

"There are not too many bargains to be seen, despite the supposed collapse," he said.

Lister said most of the weakness internationally had been in the energy and resources sectors.

"Our market is not even down 3% from its high and most stocks are unchanged and no cheaper than a month ago or six months ago.They are still trading at reasonably fully-valued levels."

He said there were more opportunities internationally if investors were willing to put up with ongoing volatility through the rest of this year. 

"In Japan, Europe and the US, things have fallen more sharply and there is an opportunity there if investors are happy to own offshore assets."

He said it was likely there would be more weakness to come. "There are real worries out there. China is top of the list and that will filter through to emerging markets and some of the world's developed markets. It's definitely a time to be cautious. There will certainly be more volatility as the year goes on.  It's also time to start taking opportunities when you see them."

He said the New Zealand market should probably have fallen more than it had.  "There's every chance of seeing the issues offshore persist for longer and get worse. The volatility will at some point reach our shores. If that happens in conjunction with dairy prices continuing to drift lower, we could see things weaken a little."

But he said there were sound fundamentals propping up the NZ market.

Brian Gaynor, of Milford Asset Management, said volatility was part and parcel of the equity markets. "They don't go up forever."

He said Milford would invest in individual companies and, while the opportunities were not plentiful, they were still available.

"Individual companies always do well even if times get difficult."

He said the New Zealand market tended to be less affected than others by international movements. "If international markets are down 10% we tend to only be down 4% to 5%.  When they are strong they might be up 10% and we are up only 4% to 5%. It's a good position to be in from a defensive point of view."

New Zealand did not have a lot of the growth stocks that were most affected. 

Gaynor said while it would be a volatile year that would probably be most keenly felt by emerging markets, to which New Zealand investors' exposure is limited.

Tags: Brian Gaynor equities Mark Lister

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