Tamsyn Parker

Tamsyn Parker is the NZ Herald Assistant Business Editor

Stock Takes: Sound familiar?

The Reserve Bank here grapples with the prospect of a property bubble emerging from the current low interest rate environment. Photo / Mark Mitchell
The Reserve Bank here grapples with the prospect of a property bubble emerging from the current low interest rate environment. Photo / Mark Mitchell

GLOWING RESULT?

Sharemarket operator NZX will report its full-year result on Monday and expectations are that it will be a good one given the strong performance of the sharemarket last year.

Mark Lister, head of research at Craigs Investment Partners says NZX is a virtual monopoly and with no debt on its balance sheet it could surprise on the upside.

"We believe the company will benefit from recent market strength and ongoing positive sentiment for equities that will drive trading volumes.

"We also think 2013 will be the strongest year for some time in terms of new listings on the market, which will be positive for NZX. All of these factors should ensure a more upbeat trading outlook."

Brook Asset Management's Andrew South said he was also expecting a solid performance from the company.

Shares in the NZX have been trending upwards since August last year when they hit a low point of $1.02.

At the end of January they had risen to $1.35. Yesterday they closed on $1.30.

RECORD LOW

Former sharemarket darling Rakon was ditched by investors this week falling to an all-time low of 26c after it revealed another profit downgrade.

The negative forecast is the third the electronic components maker has made in less than six months. Market sources say there is a strong belief the company will need to raise capital soon.

But chief executive Brett Robinson has said the company will not be looking for more cash and is within its banking covenants. One fund manager believed the company had got to a point where it was uninvestable unless significant changes were made to its board.

It's been a long held view by many in the market that Rakon is run too much like a family business rather than a publicly listed company.

Stock Takes wonders how low the share price will have to go before executives get the message.

Shares in Rakon closed up 1c yesterday on 27c.

MACQUARIE'S VIEW

The financial advice arm of Macquarie is picking four main trends for investors to watch this year. It believes consumption in China will be an area of growth which investors can target through owning companies like BMW, Samsung and Yum Brands, which has made a big push into China with fast food company KFC.

The firm is also keen on the US housing market where it believes there is now a supply and demand gap with fewer new homes being built than are needed.

But it is cautious over Europe where it believes there will be a number of shallow recessions and is also predicting that Australia's commodity boom is over.

Macquarie investment analyst Richard Frogley says he sees Chinese consumer demand continuing to push up dairy prices in New Zealand which could be good news for unit-holders in Fonterra's shareholders fund.

Frogley is not concerned about the recent drought talk and says conditions are still within "reasonable expectations".

Frogley said New Zealand's strong housing market was also good news for the construction industry with sharemarket leader Fletcher Building predicting a 27 per cent leap in earnings per share for its first-half result for 2013.

SOUND FAMILIAR? The listed Aussie banks will be watching closely and with some trepidation at the Reserve Bank's equivalent in Switzerland.

While the Reserve Bank here grapples with the prospect of a property bubble emerging from the current low interest rate environment, its Swiss counterpart has already bitten the bullet. Swiss house prices have skyrocketed over the last decade, fuelled by immigration and the very low interest rates put in place by the Swiss National Bank (SNB) as part of its attempt to take the heat out of the franc which, like the kiwi, has proven to be uncomfortably popular with international currency investors.

On Wednesday, the Swiss government accepted a proposal from the SNB that banks should build up so-called "counter-cyclical capital buffers" by holding extra capital worth 1 per cent of the risk-weighted assets in their mortgage portfolios.

As it happens, the Reserve Bank is in the process of developing parameters for the use of its own macro-prudential tools in New Zealand. A public consultation on macro-prudential policy is expected to be released in late March.

The SNB has been trying, unsuccessfully, since last July to take the heat out of the residential housing market and it hopes this latest addition to its arsenal might do the trick.

"The SNB's proposal is motivated by strong growth in both bank credit and real estate prices over the last several years, which has resulted in imbalances on the residential mortgage and real estate markets," the SNB said.

"These imbalances intensified further during the second half of 2012, reaching levels that pose a risk to the stability of the banking sector, and hence to the Swiss economy," the bank said.

New Zealand Reserve Bank Governor Graeme Wheeler said in January that house price inflation had increased and that the bank was watching this and household credit growth closely.

"The bank does not want to see financial stability or inflation risks accentuated by housing demand getting too far ahead of supply," he said then.

OFF THE MARKET Rainbow's End owner New Zealand Experience looks like it will be fully taken over by Rangatira after the Wellington private equity firm reached the minimum 90 per cent threshold yesterday.

A notice to the exchange showed Rangatira had reached 91.8 per cent - more than enough to allow it to compulsorily acquire the rest of the shares.

Looks like Rangatira's promise to de-list the company regardless of whether the full takeover was a success was enough to encourage the last few shareholders to sell out.

The 36c per share offer was due to close today.

Shares in NZ Experience closed up 7c at 37c yesterday.

BYE BYE VAN EYK Australian investment research firm van Eyk has lost a key foothold in New Zealand after AMP decided to ditch its services.

AMP made a big deal out of announcing its relationship with van Eyk in 2009 with an exclusive arrangement for the first year.

But the financial services firm this week revealed it had replaced van Eyk with Mercer.

AMP's Nick Scarlett said it had made the decision as part of a review post AMP's takeover of AXA.

"It was prudent timing for AMP to review its requirements for independent fund manager research and go to market to review options to best meet the needs of our financial advisers."

The decision will be a blow for van Eyk which was hoping to use its position with AMP to springboard itself into NZ.

OOPSIE

Stock Takes reported incorrect trading figures for Z Energy last week. They should have noted Z's recorded current cost operating earnings before interest, tax, depreciation, amortisation and fair-value adjustments was up 17 per cent for the six months to September 30 to $96.8 million.

Z Energy's year end financials, which should be due out around the end of June, will be of even more interest to investors if its potential float gets off the ground.

Shareholders Association chief executive John Hawkins says current Z Energy bond holders will also be hoping for some favourable treatment from any share offer in exchange for their support of the business.

- NZ Herald

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