New Zealand will suffer from "credit rationing" when the full effects of the US financial troubles grip the world, but its sharemarket is better placed than other world markets.
Research by broker ABN Amro Craigs said while the country would not be immune to the global credit crunch, the sharemarket had attractive low company valuations, good dividend yields and the prospect of lower interest rates.
"Our cost of funding will rise as credit spreads [margins] widen overseas, but our equity market may outperform in a global context," the ABN research said.
ABN broker Peter McIntyre said the southern hemisphere finance sector was not caught up in the sophisticated financial instruments which have caused the demise of some of the largest US companies and banks through exposure to property and mortgages.
Earlier this month, the Federal Reserve bailed out mortgage giants Freddie Mac and Fannie Mae and this week's bankruptcy of Lehman Brothers, the fourth-largest US investment bank, had shown how little exposure was held by the finance and banking sector in New Zealand and Australia.
Mr McIntyre said underpinning of struggling US companies by the Federal Reserve would only prolong the uncertainty of markets.
At some point, "the piper had to be paid" when company after company was propped up with borrowed money.
"There's a certain amount of credit in the world, just as there's only a certain amount of capital," Mr McIntyre said.
New Zealand had been skewed in recent years with the rise and rise of property prices, but he believed that, during the next 18 months to three years, property would underperform while the equity markets would move to "outperform".
"There's no doubt we will suffer the effects of credit rationing in the future, with higher interest rates and rising unemployment," he said.
Economic growth was slowing in Europe and the UK, commodity prices were down and affecting New Zealand exports, and with Australia, our biggest trade partner, also slowing in growth, it would similarly have a negative effect on exporters, he said.
However, Mr McIntyre said a falling dollar would assist exporters as would lower interest rates.
Households would similarly have some gains from tax cuts and falling fuel prices.
