There has been a lot of buzz around resources lately, which look to be one of the few investment opportunities in a virtually fully-valued Australasian stockmarket.

Stephen Bennie, of Castle Point, said the mining services sector offered a pocket of opportunity because it had fallen dramatically out of flavour. “Investors have fled that market and in the process have crunched down share prices to the point where they’re offering significant value.  For those that are bold or brave enough to look at them there are companies there that are extremely cheap.”

But adviser Brent Sheather said the value might not be as good as it seemed.

In the five years to April 30, the Australian stock market has returned 4.1% per year, world stock markets 9.3% per year and BHP shares – 5.5% per year.

“If you drew a graph of the iron ore price you might have a second thought. Everyone says because it’s been $X and it’s now half that it must be good value but that ignores the fact that the iron ore price has fallen by as much as BHP’s price has. The profits are less.”

He said his firm went underweight on Australian stocks about three years ago due to concerns about China’s bad debt issues and was worried that many New Zealand retail investors had too much exposure to that market. 

For investors who already had significant exposure to the New Zealand market, it could be unwise to have too significant an investment across the ditch too, he said.

“If you think the global economy is going to bounce back real quick then resources could be the way to go but the bond market says not and I tend to trust the bond market.”