Forecasting the direction of shares, currencies and
interest rates is very difficult to do, especially with any
accuracy or consistency. But with nine out of 10 predictions
coming true in 2012, Craigs Investment Partners did well.
Business editor Dene Mackenzie talks to Craigs adviser Greg
Easton about the predictions for this year.
Greg Easton ponders the year ahead. Photo by Craig Baxter.
Crystal ball gazing can be seen as a necessary exercise for
investment advisers and strategists as it allows them to
focus their thoughts, consider various scenarios and evaluate
risks and opportunities, Craigs Investment Partners broker
Greg Easton says.
Rather than rely too heavily on market predictions, Craigs
preferred to consider them as talking points that might
encourage some insightful debate and thought.
(1) Returns from shares will again beat fixed income and
Shares were the best place to invest in 2012, and Craigs
thought they would take first place again this year, Mr
Easton said. Dividend yields would remain much higher than
interest rates, companies were in good financial shape,
earnings were growing and investor sentiment was likely to
move further in favour of shares.
(2) Australian shares will do better than New Zealand
For the past three years, the New Zealand market has been a
much stronger performer than Australia's. That could turn
around over the coming years. Australia had cut interest
rates aggressively, China was stabilising, Australian shares
looked better value than New Zealand shares and sentiment -
which was at rock bottom - could only go up. In Australia,
Craigs liked companies such as AMP, Spark Infrastructure, ANZ
Bank, Seek, Computershare, BHP and Rio Tinto, he said.
(3) The official cash rate will remain unchanged all
''We can't see any reason for the Reserve Bank to increase
interest rates until sometime in 2014,'' Mr Easton said.
''We might get a bit of growth boost from the Christchurch
rebuild but it won't justify any movement in rates, and
investors looking for income won't get any reprieve from the
current low interest-rate environment.''
While many high-dividend companies had already performed well
in the wake of low interest rates, those such as Sky TV,
Argosy Property, DNZ Property, Vector and Telecom still
looked ''reasonable value'' and should continue to attract
attention in 2013.
(4) At least five new companies will list on the
With or without state-owned enterprises, activity in terms of
new listings and opportunities should continue to build. The
market was strong, sentiment was high and there was a lot of
cash sitting in low-return bank deposits.
''In 2013, we might have the best year for some time when it
comes to new investment opportunities. A key beneficiary of
this trend will be the NZX,'' Mr Easton said.
(5) China will recover to a growth rate of 8%.
Chinese economic growth for the September quarter was 7.4%,
having consistently slowed since the first quarter of 2010.
That could well be a turning point and growth in China could
start to re-accelerate in 2013.
(6) Growth shares will do better than high-income
Over recent years, the safe, defensive, high-yielding shares
had been outstanding performers, Mr Easton said.
''They still look attractive and will hold up well. But we
might see a continuing rebound for some of the more cyclical
companies such as those in the building sector, those exposed
to equity markers or the retailers.''
Under that scenario, the mid-caps and smaller companies might
also continue to outperform their larger peers.
(7) The Christchurch rebuild will get properly under
After many delays, there are signs of the rebuild process
gathering some ''decent'' momentum, he said. That should help
economic growth as a whole as well as benefit the
construction sector and stocks like Fletcher Building, Opus
and Steel & Tube.
(8) Apple shares will go back up to $US650
Having hit a high of $US700 in September, Apple shares fell
25% over the following few months. The company remained an
outstanding growth opportunity, had no debt and was good
value on almost every measure, Mr Easton said.
(9)American house prices will outpace Auckland house
Auckland house prices were great for property investors last
year, rising more than 10%. The Auckland market still had
strong fundamentals but even the most one-eyed property
investor would concede that valuations were beginning to look
expensive relative to rents and incomes. American houses were
starting to show some strength after many poor years. The
wealth effect that would have on sentiment and the US economy
(10) The New Zealand dollar will fall.
''If ever there was a contrary call at the moment it would be
for the New Zealand dollar to weaken or the US dollar to
Like most economists, Craigs' official view was that the
currency would remain above US80c this year, but it was worth
raising as a scenario because if it did fall, many investors
were poorly positioned, Mr Easton said. After the outstanding
performance from the local market in 2012, investors had been
driven even further into domestic assets.
The kiwi was strong and no-one should be eager to see it
collapse. However, some weakness would help exporters and a
better-than-expected US economic rebound would see the US
''If nothing else, we should give some consideration to the
possibility of international markets outpacing the local
market over the coming year and use our strong currency to
add some good-quality global companies,'' he said.
1: Recession in Europe, while US economy surprises.
2: No break-up of the eurozone in 2012. Correct
3: No hard landing for China. Correct, but only half a point
as Craigs also predicted it would achieve 8% growth when it
only got into high sevens.
4: Shares have a positive year. Correct
5: Interest rates remain very low. Correct
6: NZ dollar rises against our major trading partners.
7: Fixed interest does not repeat its 2011 performance.
8: Barack Obama re-elected US president. Correct
9: Mighty River Power might not be only game in town as
legislative changes might enable Fonterra to introduce share
trading allowing the public to invest. Correct
10: Inflation falls back to low levels. Correct