Jardens predict boost, then lull

Press, 2 May 1985, Page 28

Jardens predict boost, then lull

PA Wellington An improvement for the sharemarket in the short term but a weakening later in the year, is seen by the Wellington-based brokers, Jarden and Company. In their latest investment review, Jardens said it was difficult to forecast how long the current level of corporate activity would be sustained. All the opportunities had not been exploited yet and, for this reason, there was

potential for the market to rise in the short term. Neverthless, the market was likely to come under pressure because: • Future progress in reducing the deficit would be slower and the Government might have to allow interest rates to rise even further if it were to achieve its monetary policy objectives. • The higher economic risks now faced by many companies would become more obvious as competition increased, economic ac-

tivity weakened and their position began to deteriorate.

O The inflation outlook was likely to lead to strong pressures for high settlements in the September wage round. Over all, these factors should lead to a weakening of the sharemarket later this year, although the potential for a drop would be limited.

The current corporate activity would result in a

permanent rerating of many of the larger companies.

In addition the impact of the Government’s long-term policies in many areas would be positive and would enable some companies to maintain good profit growth, in spite of weakening activity.

Jardens said the recent strength of the market reflected the excellent company profit results and the willingness of investors to take a long-term view about the impact of Government policies.

It was also responding to an exceptionally high level of corporate activity. In part, this related to the Government’s economic strategy, which had created an environment conducive to rationalisation and opened up new opportunities to switch business assets to more profitable uses. It had also improved the attractiveness of purchasing existing assets compared with new investment.