NZ in line for sharemarket boom

The passing of the Australian mining investment boom and the growing value of China's consumer market is all good news for New Zealand's economy and its sharemarket, says a leading investment management firm.

Macquarie Private Wealth's Sydney-based division director Martin Lakos said the company picked New Zealand's gross domestic product to increase by about 2.7 per cent in 2013 - higher than Australia (1.5 per cent) and the United States (2 per cent).

Lakos said Australian mining companies were no longer investing the large amounts of capital in their operations that they had been because commodity prices had settled down, but that meant stock markets were now hotting up.

Global equity markets, including NZX-listed Kiwi companies, could benefit from the sharemarket rise that has historically followed a commodity boom, Lakos said.

"If we're at the end of another commodity price cycle it gives some degree of confidence that we think stockmarkets can go higher. 

"As commodity prices are a big input cost, and if prices are rising, then managers of industrial companies tend not to be proactive in their own investment outlook - it's seen as a headwind and they're not making the big investment decisions.

"Once the higher prices start to ease off or the market gauges that prices aren't going any higher you see a commensurate recovery in the stockmarket."

Lakos' predictions are drawn from the expertise of Macquarie's analysts across New Zealand, Australia, North America and India as combined in its 2013 Global Market Outlook report.

The report said the Chinese economy had been well-managed down from its "runaway" GDP growth, the European debt crisis had been largely avoided through the structures and back-up funding of the European Central Bank, and new economic indicators out of the US were encouraging.

Macquarie New Zealand investment analyst Richard Frogley said the company was forecasting about 12 per cent earnings per share growth overall for the NZX50 Index in 2013.

"That's a little bit stronger than what we would see in Australia, so it's nice to see after having a period of New Zealand growing a little bit more slowly than Australia that we've got an opportunity here to be in a relatively strong position for this year."

Frogley said continued expansion in dairy would drive export earnings, with Fonterra leading the charge and a drought in the United States putting Kiwi farmers in the box seat to supply protein demand from China.

He picked the construction sector, led by Fletcher Building and based around the Canterbury rebuild, to contribute one per cent of this year's estimated GDP growth.

Lakos said impetus in the housing sector was important to drive consumption growth, and he believed years of household deleveraging would soon pay off.

"One of the big drivers for the US economy, as it is here in New Zealand and in Australia, is housing because it has all the commensurate benefits of consumption when you have new houses built."

Consistently low interest rates in the US were pushing Americans to buy into a resurgent housing market and confidence, signalled by "household formation" statistics, was growing. 

"With housing formations picking up and mortgages being relatively cheap, we think this [US] housing cycle has got a long way to go."

Frogley said New Zealand's housing market, and particularly Auckland's, was subject to similar pressures and a growth in willingness to buy.

"When people feel relatively comfortable in their situations then they're going to want to form households, but more importantly the population growth in Auckland is also contributing so you've got a double-whammy there."