NZX on the rise after three years in doldrums

An investment analyst says falling interest rates have given the local share market a strong boost by freeing up investor cash.

The pandemic and the recovery from it left the NZX in the doldrums, while other markets around the world performed well.

It made a small gain of just 2.6 percent last year following losses in 2021 and 2022, but prior to that the exchange was on a more than decade long winning streak.

Craigs Investment Partners investment director Mark Lister said high rates have been the main problem, hurting consumer spending, industry, and investor sentiment.

"All central banks have had to increase interest rates to knock inflation on the head, that's hit us harder than many. Our housing market is quite central to our economy. When the housing market falls close to 20 percent, that's not gonna do you any favours.

"Our share market is also quite interest rate sensitive in terms of the types of companies we have on our market. They do well when rates are going down or when they're stable rather than rising."

He said when rate cuts became a possibility earlier this year, many astute investors began injecting money back into the share market.

"Share markets look ahead so people are trying to get ahead of that sort of move... We've seen a nice little lift and the market at the moment is up close to 10 percent [in the] year to date and a lot of that growth has come just in the last few months, so we've definitely seen a turn in some companies more than others.

"I think that will continue as you see the economy recover and interest rates come down more quickly than many people were expecting over the next 12 months."

Lister said cheaper shares on the NZX could also help draw in investors looking for a bargain and support a turnaround.

"I guess the positive from our underperformance over the last few years is we don't look quite as expensive as we have in the past or as some other markets around the world.

"New Zealand share prices are still about 15 percent below where they were in early 2021. If you look at the market as a whole, so that means there's definitely some upside as you look ahead to 2025 and certainly beyond."

Lister expected there to be genuine economic recovery in early 2025, putting more money into the pockets of consumers and businesses to flow into listed companies.