NZX50 reaches symbolic 10,000 mark
WELLINGTON: The NZX50 share index cracked the milestone 10,000 mark yesterday, continuing a run of recordbreaking highs.
At 12.30pm, it was trading at 10,032, but it ended the day at 10,0004.84, up 45.22 since Thursday’s close.
The 10,000 mark was only symbolic but was something to celebrate, said Mark Lister, head of research at Craigs Investment Partners.
The NZX50 is a construct in that it is an index for the country’s largest listed companies.
But key numbers often have market sentiment attached to them, and this is a big one.
‘‘Fundamentally, it doesn’t mean anything,’’ Mr Lister said.
‘‘But people do follow these numbers. We’ll get excited if Wall Street’s Dow Jones (Index) goes through 20,000, we’ll get excited if the S&P 500 goes through 3000.
‘‘So I don’t see why we shouldn’t celebrate this.’’
If nothing else, the indexes lift into fivedigit territory serves as another reminder of the New Zealand sharemarket’s remarkable run in the past decade.
In fact, the NZX50 has now risen almost 300% since the last low point — a decade ago in February 2009.
The NZX50 returns are calculated on a gross index basis with dividends factored into it.
Looking at the capital return alone, that would be more like 30% up on the last peak in 2007, Lister noted.
However, it had still been a ‘‘stellar run’’ for investors and KiwiSavers, he said.
The index had doubled from the 5000point mark in almost exactly five years — representing annual returns of close to 14%.
The strong bull run appeared to be at an end late last year. Global markets tumbled by almost 20% between October and December — just shy of what investment analysts would have called a bear market.
However, a reversal of central bank policy on interest rates — initially in the US — has led to money being poured back into equity markets this year as investors seek better returns.
Some big equity fund managers have expressed nervousness about the heady heights the market is now reaching and the valuations of some companies.
It was important not to take annual returns in the double digits for granted, Mr Lister said.
It needed to be acknowledged that this was a golden period.
‘‘Thirteen or 14% returns is not normal — it’s exceptional. Over the long run, the average is more like 7%.
‘‘So don’t get too comfortable and assume the next five or 10 years will go the same way because I strongly suspect they won’t.’’
However, the strength of the sharemarket was also an indication of an economy which was still performing well despite the lack of confidence in some quarters, he said.
‘‘We’ve got a lot of great businesses on our market now and it’s a much more diverse market than it was five to 10 years ago, with more interesting companies doing interesting things offshore. I think it’s something we should celebrate.’’