Investment firm JBWere has recommended that its clients lower their exposure to the New Zealand equity market.
The firm first outlined its concerns about the market in October.
JBWere said in a research note to clients last week that the local equity market continued to trade at a 5 to 15 per cent premium to global equities.
It noted that the New Zealand dollar remained elevated against the currencies of New Zealand's main trading partners.
The firm said higher interest rates will be a headwind for New Zealand in 2014, both from the Reserve Bank of NZ and also from when the US Federal Reserve is expected to start winding back its quantitative easing programme.
Next year's general election in New Zealand will be an important development for the local equity market, it said. "We don't like the binary risk this presents to investors," JB Were said.
"This backdrop leaves us underwhelmed with the risk-reward presented by the local market," it said.
But JB Were said this did not mean that New Zealand equities were necessarily going to decline in 2014. "It simply reflects we don't believe investors are likely to be adequately rewarded for the risks they bear in this market," it said.
JBWere has maintained a "neutral" stance new Zealand equities since June 2011. Over this time the local market has delivered a total return of 37 per cent.