Where to invest in 2020
(with at a least a 51 per cent stake, which provides some comfort around the security of the investment), and investors have seen good outcomes since the companies were floated: Mercury floated at $2.50/share and is now trading at about $4.90; Meridian floated at $1.50 a share and is now at about $4.80; and Genesis floated at $1.65 a share and is now at $3.05 or so.
‘‘Although these returns might not be at the same level as A2 shares and so on, they are a solid longer term investment, especially with New Zealand’s energy companies already thinking about and moving towards even more renewable energy, in line with the Government’s thinking,’’ Olsen said.
Mark Lister, at Craigs Investment Partners, said good returns should continue but at a slower pace – locally and on international markets.
‘‘Equity markets are facing a number of challenges including ailing economic activity in some of the major regions, high valuations and subdued corporate earnings growth. Geopolitical tensions are likely to remain prevalent, which will mean volatility remains high and markets will be sensitive to news flow.
‘‘However, inflation remains low and central banks are focused on keeping monetary conditions highly accommodative. Our recommendation is to remain invested but to position portfolios defensively and expect more volatility. Ensure you are well diversified and stick to quality businesses that are ‘best of breed’. Smaller companies and more cyclical businesses tend to be more sensitive during periods of economic weakness, so conservative investors should limit exposure to these.’’
Commentators expect house prices to pick up again in 2020 – at a rate of anything between 3.5 per cent and 7 per cent, depending on which forecast you listen to.
Olsen said the ability to leverage equity to invest would make housing an attractive option in 2020 for those who could afford it. ‘‘Although construction activity is at historically high levels, New Zealand’s population growth over recent years means the market is still undersupplied in key areas, meaning there is still heat in the market.’’
But the picture is likely to be mixed around the country.
Corelogic head of research Nick
Goodall said there could be strong demand pressures from population growth in Whanga¯ rei, Waikato District and Waipa District,.
‘‘However, with relatively higher values here I think future growth will be somewhat constrained. In the shorter term then, I think the areas with lower property values could see continued higher growth. Here we are talking about Gisborne, Whanganui and Invercargill, where the average value is under $400k in each. The key thing in these areas is to understand the future economic situation – if the local economy cannot sustain the increase in population, then people may leave which would reduce demand and pressure on property values.’’
At Homes.co.nz, data scientist Tom Lintern said Christchurch could see strong gains.
‘‘Median property values have started to increase in Christchurch after a sustained period of flat property prices and I would not be surprised to see significant growth in this market in 2020.
‘‘Small towns in the central North Island have performed strongly in 2019, such as Feilding where values have increased by over 16 per cent, and I see no reason why this won’t continue into next year,’’ Lintern said.
There have been concerns that slower economic growth could tip the country into a recession but Lister said it seemed unlikely.
Growth was still positive, he said, and traditional indicators were not pointing to recession.
‘‘The US yield curve was inverted – a recessionary warning signal – through the middle of this year, but this is no longer the case and the yield curve is now the steepest since 2018.
‘‘The US unemployment rate has historically been another good indicator of recessionary risks, and it is at a 50-year low of 3.5 per cent,’’ Lister said.
‘‘Here in New Zealand, we are quietly confident there will be an uptick in economic activity. Business confidence has rebounded in recent months, the Fonterra payout is forecast to be the best in six years, unemployment is low and migration remains well above long-term averages. Low interest rates will provide support, and a bit of fiscal stimulus from the Government will also help.’’