Time for new way to value equities?
New Zealand’s equity market has a price-to-earnings (P/E) ratio of 18.5, compared to a five-year average of 16.2.
But Stuart Williams, head of equities at Nikko Asset Management, said while that seemed expensive, it did not mean the stocks were overvalued.
“Most people who look at equity valuations look at P/E. They look at that and go it looks elevated versus its history, which is true. But history is largely irrelevant when you consider history is full of much much higher interest rates.”
He said when the OCR was 5% or 6%, that was a different investing landscape.
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