Record year for stockmarket
We keep hearing it: It's been a stellar year for the New Zealand stockmarket.
The NZX50 hit an all-time high of 4983.6 points last month from 4066.5 points at the start of the year.
And it's been a record trading year for the local bourse.
The total number of trades increased by 31.6 per cent compared to last year and the total value traded was up 47.9 per cent compared to last year to $39.5b.
While the stockmarket has pulled back a little in the past month, it is still sitting more than 15 per cent above where it started the year.
The NZX has seen a spate of listings and the government asset sales, new investors jumping into the market, old investors returning and a flood of KiwiSaver funds adding value to the market.
The landscape is likely to change next year as the Reserve Bank raises interest rates and government asset sales peter out.
But experts say the NZX's good run has not yet come to an end.
Craigs Investment Partners adviser Stuart Hardie says the only way to look at what the market has done this year is move "from whoa to go", with the low interest rate environment driving the market.
The official interest rate has remained at 2.5 per cent since April 2011, attracting investors back into the sharemarket looking for a better return, he says.
Listings, especially of bigger companies have added "more size and more depth" and give KiwiSaver funds somewhere to go.
This year the government partly sold down its stake in Mighty River Power, Meridian and Air NZ, with Genesis still on the to-sell list, probably.
Whether New Zealanders believe the government's asset sales programme is the right thing or not it has increased the sharemarket's profile, Hardie says.
"Companies are using the sharemarket for what it's for: raising capital."
In the case of Mighty River Power 113,000 retail investors bought shares. Some 62,000 mum and dad investors took a slice of the Meridian pie and last month investors snapped up 221 million shares in Air New Zealand.
There were also listings of non-state-owned companies, such as Z Energy, The Mad Butcher and Synlait Milk helping to add total of $7.2 billion in new capital listed on the NZX compared to $1.6b for last year.
Market commentator Arthur Lim says despite the attention created by asset sales, mum and dad investors' appetite for initial public offerings has been "severely dampened and jaded" with the three government selldowns so far.
"It hasn't been a pretty experience."
But overall the sharemarket has done well on the back of the strong New Zealand economic outlook, Lim says.
"The prognosis for the New Zealand economy and the overall economic environment which our companies operate in are looking pretty good and steadily delivering."
Lim says the sharemarket looks forward and economic forecasts for 2014 and 2015 are also looking rosy.
Hamilton Hindin Greene director Grant Williamson says confidence has returned to the market.
However, the market has experienced something of a correction as the year draws to a close indicating some profit taking by investors after a good run.
The regulatory environment has also weighed on the sharemarket in the past month, Williamson says.
There has been a sell-off in Chorus over the ongoing broadband pricing debacle and its shares are now trading about 50 per cent lower than a year ago.
Vector has also taken a hit after the Commerce Commission decided to slash its gas distribution and transmission prices.
Williamson says investors are starting to become cautious.
Cloud accounting software company Xero has been the undisputed sharemarket darling among the stand out performers this year.
Xero's shares have rocketed from $6.55 in January to $41.50 last month. They have since settled to a bit above $30.
Hardie says the company's rally is a difficult thing to understand from an adviser's point of view because the company's growing but is yet to turn a profit.
"Everyone was talking about Xero. Whether everyone understood what they do or not is another thing."
The market loves the story of a New Zealand company taking on the "big boys", globally, Hardie says.
Tech companies Snakk Media and GeoOp alsofloated this year following Xero's success.
Smartphone advertising company Snakk Media listed on the junior NZAX market in March.
GeoOp, which sells cloud-based job-costing and invoicing software that runs on smartphones, listed in October.
The company's share price more than doubled from its $1 listing price to close at $2.20 after its first day of trading.
Lim describes Wynyard Group, Snakk Media and GeoOp as "coat tail listings".
"It's a good thing provided investors don't get carried away." Investors should focus on the fundamentals of companies, he says.
Williamson says the success of the technology and IT sector has surprised this year.
"A little bit of speculation has come into the market."
The strong performance of the retirement sector, should continue into 2014, Williamson says.
Ryman Healthcare shares are trading almost 80 per cent higher than a year ago.
While Summerset is up about 45 per cent compared to this time last year and Metlifecare by more than 30 per cent.
Lim says the sector's success is reflective of the dynamics of New Zealand's residential property market.
But three companies are lining up for the award for the year's worst performer: Chorus, Rakon and Moa, Hardie says.
The regulatory risk surrounding Chorus is not good for the company, he says.
"Markets don't like uncertainty ... . They got absolutely hammered for that."
Rakon, the producer of crystal components for smartphones and weapons was also slammed this year with the stock losing more than half its value.
Boutique beer company Moa suffered a similar plunge following distribution troubles earlier in the year.
Hardie says Moa is trying to do and say the right things but some times the market "gets the pip".
"The market's pretty cutting when things don't go the right way."
Listed retailers are beginning to benefit from consumers loosening their wallets in the lead up to the all-important Christmas trading period after a tough start to the year, he says.
Diary stocks will continue to flourish next year.
Synlait, which floated in July at $2.20 has seen its share price riseto just below $4 this week was the best performing new comers of the year, Hardie says.
Likewise alternative milk company A2 milk has gained nearly 40 cent, trading at about 75c this week.Hardie says now it's possible for non-farming kiwis to get exposures to the sector.
The Christchurch rebuild will all but ensure construction companies will benefit, he says.
The prospect of rising interest rates next year will affect the appeal on shares, but Hardie says rates will need to rise by more than half a percentage point before people pull their money out of stocks and put it back in the bank.
This year's listings have been "pretty grunty" and while there will be more listings next year, it is unlikely there will be 10 big listings.
Lim says the biggest change next year will be investors putting their money into growth companies, which while riskier, will out-perform during a period of economic growth.
NZX could gain as much as another 10 per cent in 2014 if companies can continue to improve profits.
There's demand for more listings heading into the New Year, especially with the continued investment of KiwiSaver funds, he says.
FROM A SHAREHOLDERS' PERSPECTIVE
Shareholders' Association chairman John Hawkins says he focuses on the pluses and minuses of the fundamentals of different companies, including their governance.
When investors move into "blue sky territory" they can have big wins but also big disappointments, he says.
Xero could be the next Microsoft but it's too early to tell.
It's important to have a balanced portfolio and the amount of risk investors take on depends on what stage in life they are at.
"And you should never lose sight of that."
Summerset has had good share price appreciation and is consistently beating its own guidance, Hawkins says.
Ryman, the perennial favourite, is expanding into Australia in a "careful, measured" way, as they have always done.
These retirement village companies have experienced more of a gradual gain rather than the bubble experienced by some of the more "spectacular" companies.
Kiwi Income Property Trust (KIPT) makes Hawkin's list for taking on a better model by internalising its management.
Once the local corporatisation of the company's management is complete it will be a "real positive" for investors.
These companies might not have seen spectacular share price growth but they are conservative investments, appealing to shareholders saving for retirement.
Healthcare products supplier Ebos deserves a pat on the back for doing a deal to run the public health supply chain for 20 district health boards.
"It's a New Zealand company that really does want to be a market leader."
Hawkins also named Fisher & Paykel Healthcare on his list of this year's top performers.
The company has increased its share price by more than 55 per cent in the past year.
Hawkins says the improvements started at board level and filtered through.
Healthcare company Pacific Edge has experienced a share price appreciation of more than 200 per cent this year.
And NZX also deserves a positive mention after improving the pipeline of new listings, Hawkins says.
Any companies associated with New Zealand's regulatory model and "political football game" have not performed well, Hawkins says.
The unstable regulatory environment was causing "a lot of angst" for investors.
The share price depreciation of companies like Chorus, Meridian and Mighty River Power has nothing to do with the underlying business model, he says.
Problems with financial statements have seen Diligent Board Member Services' share price drop almost 30 per cent in the past year.
Hawkins says the company's neglect of detail has had a huge impact.
"Every time they take one step forward they seem to take half a step back."
It's important to do the small things well and the big things will follow, he says.
Rakon showed a "pretty unfortunate regard" for shareholders by releasing a profit warning to the market only an hour before its annual meeting.
The timing of the announcement didn't leave shareholders with enough time to vote against the directors up for re-election, he says.
And last on the list is investment firm Pyne Gould Corporation.
Hawkins says the company has had governance issues and it will not be missed when it relocates to tax haven Guernsey in the Channel Islands.
This story has been updated to include more comment from NZ Shareholders Association chairman John Hawkins that was edited out of a previous version.
- Fairfax Media