In the spirit of The Economist’s “Big Mac Index“. Here at Valuecruncher we decided to repeat an exercise we did earlier in the year - to assess the overall current valuation of the New Zealand stock exchange (NZSX) - the market as a whole. Our objective was to assess whether the overall market might be over- or undervalued.
To do this we took a simplified approach. At Valuecruncher we have completed valuations for 36 of the NZX50 companies. Four of these companies are not NZ-based so we eliminated them and we have a crazy number coming out of Nuplex ($NPX.NZ) so we also eliminated them. That leaves us with 31 companies. These 31 companies have a market capitalisation of NZ$31.8 billion - this represents just over 70% of the NZSX total market capitalisation of NZ$44.5 billion. We took these 31 companies and compared our valuations to the current share price - determining a percentage under- or overvalued. We then weighted these percentages by the market capitalisation of the 31 companies. By summing these weighted averages we came up with an estimate of the valuation of the New Zealand market.
Based on our sample of 31 companies - representing just over 70% of the total NZSX market capitalisation. Valuecruncher estimates that the New Zealand stock exchange is undervalued by just under 3%. Valuecruncher is saying that overall the market looks slightly cheap. Our numbers are included in the table below.