MARKET TALK: Reasons to be upbeat on NZ, Apple’s shock and Chinese stocks to watch

New Zealand listed companies are still tracking well ahead of earnings season and one analyst is picking a solid run of numbers when they report next month.

“Based on our first cut of the previews it’s looking like mid-to-high, single-digit earnings per share growth for the six months ending December 31," Forsyth Barr head of private wealth Rob Mercer told NBR Radio’s Andrew Patterson.

“So New Zealand is still tracking pretty well. Just looking at our market versus the rest of the world, we are the only one that’s actually in positive territory since December 1. So again, earnings are proving to be resilient for a lot of companies on average and that’s reflected in a market that investors are still happy to stick with, given interest rates are so low and we still have a cash dividend yield that’s still over 4.5%”

Looking offshore, Mr Mercer notes Apple shares stumbled midweek after the company reported its slowest-ever rise in iPhone shipments and forecast that quarterly sales for the current period would post the first drop in 13 years.

However, he says there’s still plenty to like about the company.

“Putting it into perspective, Apple has $150 billion of cash on its balance sheet. It’s got a market cap of $500 billion. It’s currently trading at a price to earnings ratio of 10 times, which puts it among the cheapest companies listed in New Zealand. And it's still actually forecast to increase earnings somewhere between 7-10% a year for the next three or four years. So the issue on Apple at the moment is a bit of a transition regarding what’s happening in China but also the success of iPhone6 and future upgrades.

“I’m not worried about it from a value proposition on Apple. You are basically buying it on the same multiple that you can buy Fletcher Building in New Zealand.”

Meanwhile, Mr Mercer gives his assessment of Asian equities at the moment. And we look at what Fonterra’s downward revision to the milk price payout to farmers will have on the wider market.

Tune into the special audio feature for the full interview.

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