The outlook for investors

The Christchurch rebuild should boost the construction industry. Photo / Getty Images

Investment analyst Mark Lister looks at how the market could perform in the year ahead and focuses on 10 areas that are likely to prove significant in 2013.

1 Returns from shares beat fixed income and residential property. Shares were the best place to invest in 2012, and I think they will take first place again in 2013. Dividend yields remain much higher than interest rates, companies are in good financial shape, earnings are growing and investor sentiment is likely to move in favour of shares.

2 Australian shares do better than New Zealand shares. For the past three years the New Zealand market has been a much stronger performer than Australia, although this could turn around over the coming year. Australia has cut interest rates aggressively, China is stabilising, Australian shares look better value than ours.

3 The OCR is unmoved all year. I can't see any reason for the Reserve Bank to increase interest rates until some time in 2014. We might get a bit of a growth boost from the Christchurch rebuild, but it won't justify any movement in rates.

4 At least five new companies list on the NZX. With or without SOEs, I think activity in terms of new listings will continue to build. The market is strong, a lot of investor cash is sitting in low-return bank deposits and 2013 will be the best year for some time when it comes to new investment opportunities.

5 China recovers to an 8 per cent or more growth rate. Chinese economic growth for the September quarter was 7.4 per cent, having consistently slowed since the first quarter of 2010. This could well be a turning point.

6 Growth shares do better than high income shares. Last year the safe, defensive, high-yielding shares were outstanding performers, but this year we might see a rebound for some of the more cyclical companies, such as those in the building sector. The higher growth companies pay lower dividends, but look better value, remain out of favour and might provide better opportunities in 2013.

7 The Christchurch rebuild gets properly underway. After many delays, we are finally seeing signs of the rebuilding process gathering momentum. This should help growth as a whole, as well as benefit the construction sector and stocks such as Fletcher Building, Opus and Steel & Tube.

8 Apple shares go back up to US$650. Having hit a high of US$700 in September, the US company's shares have fallen 25 per cent over the past few months. The company remains an outstanding growth opportunity, has no debt and is good value on almost every measure.

9 American house prices outpace Auckland house prices. Auckland house prices were great for property investors in 2012, rising over 10.7 per cent. The Auckland market has strong fundamentals, but even the most one-eyed property investor will concede that valuations are looking pricey relative to rents and incomes. American houses are just starting to show some strength after many poor years, and the wealth effect this will have on sentiment and the US economy is significant.

10 The New Zealand dollar falls. Our currency is strong because our economy is stronger, so we shouldn't be wishing at all for it to collapse, but a bit of weakness would help our exporters out. While the currency will probably stay high, a better-than-expected US economy would see the languishing US dollar rebound and many investors are not positioned for that scenario. Everyone has given up on the currency falling so maybe that's a signal we should use this strength to buy some international assets.

•Mark Lister is head of private wealth research at Craigs Investment Partners. His disclosure statement is available free under his profile on www.craigsip.com. This column is general in nature and should not be regarded as specific investment advice.