Expectations of corporate robustness

A robust set of financial results is expected as the corporate reporting season for New Zealand and Australian companies starts next month.

Craigs Investment Partners broker Chris Timms said the reporting season would give the market an update on trading conditions, the economy and the strength of the important holiday period.

''We also expect to get further positive news out of China over the next few months.''

Stable economic growth would be an important signal for Australia and New Zealand given the reliance on China from an export perspective.

Many countries across the world, such as the United States and Japan, continued to print money as a form of economic support, he said.

With Australia and New Zealand sticking to traditional monetary policy initiatives, as well as having higher interest rates than other countries, the transtasman currencies were expected to remain at current high levels.

The United States had committed to keeping interest rates at near zero until the unemployment rate improved. That could take years and would keep downward pressure on the US dollar.

''There is potential for further interest rate cuts in Australia, which may see the New Zealand dollar strengthen slightly against the Australian dollar.''

Mr Timms said last year was tough for fixed interest investing and this year was expected to be just as difficult.

The Official Cash Rate was expected to remain flat, yields were much lower than investors would like and new issues would be unlikely to fully satisfy investor demand.

''Unless we see stronger growth than expected, yields may not move higher until late 2013. While we still favour corporate bonds, the compression in credit spreads that we have seen recently has made value harder to find, and we do not expect much in the way of capital gains from fixed interest this year.''

The property sector offered a ''solid'' income outlook with dividends at sustainable levels and an average gross yield of more than 8%, he said.

That should be enough to keep the sector well supported, although with earnings growth likely to be minimal, share prices were expected to be relatively flat in the first quarter.

Craigs favoured internally managed property vehicles due to their lower fees - particularly in the face of rising asset values - and Mr Timms saw potential for further capital raisings across the sector.

Craigs remained positive on equities and expected most markets to trend higher, although there would be ''event driven volatility'' throughout the year.

Late February could be the next difficult patch as US politics moved back into the spotlight, he said.

''Politicians will need to revisit the debate over how to tackle rising US debt at some point and this might happen in late February when the US is scheduled to reach its debt ceiling. This will likely see a fresh round of similar political wrangling as both sides of Congress push for different demands.''

The NZX looked solid with attractive yields, a stable economic backdrop and modest earnings growth prospects, Mr Timms said.

However, following a strong run in 2012, international markets might perform even better in the coming year. Craigs recommended investors look to add to Australian and international holdings.