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The Delta Blues

Harbour sails 4
Harbour Team | Posted on Aug 18, 2021
Done it before, let’s do it again

We hope you are all keeping safe & well as we find ourselves back in level 4. We have done this before, and we can do it again!

From an investment perspective, it is important to appreciate that a move back to lockdown was considered a possibility and partly factored in, especially as our market watched the Australian delta variant outbreak unfold. As well as the challenges of a snap lockdown, today has been one of the busiest days of the year for both companies reporting and the macro-economic calendar.

Today the New Zealand equity market bucked the trend from markets overnight with equity prices recovering after strong local company results and AGM updates positively impacting some of our largest companies.

Fixed income and currency markets, however, were more affected by the COVID-19 outbreak news, with the Reserve Bank of New Zealand (RBNZ) displaying considerable risk awareness in deciding not to proceed with a rate hike today that it was widely expected to make.

The RBNZ “read the room”

The RBNZ left the Official Cash Rate (OCR) unchanged today at 0.25% in light of the heightened health uncertainty. The Monetary Policy Committee however, also noted confidence that rising capacity pressures will feed through into inflation, and that employment is at its maximum sustainable level. This confidence was reflected in an OCR forecast that showed hikes beginning earlier and reaching a higher point than the May projections.

The tone of both the Monetary Policy Statement and the press conference were consistent and clear that the economic data support the case for higher interest rates. However, the actual path of OCR decisions will likely be subject to the COVID-19 outbreak and the extent to which fiscal policy addresses any economic fallout.

Companies reporting season

Today we have had many companies report earnings and provide updates including some or our largest companies like F&P Healthcare, Fletcher Building, Spark and Ebos. Updates were generally strong across the board reflecting the global economy and specific positive influences. A key theme remains some caution in comments regarding the outlook.

The lockdown has a range of short-term impacts on companies we may invest in, depending on the sector.

Risks are greatest for businesses that are most impacted by mobility restrictions or activities that rely on in-person interaction. For example:

  • physical retail – e.g. mall owner Kiwi Property may need to provide rental support to retailers if the lockdown is extended
  • travel – e.g. Air NZ, Auckland Airport
  • construction – e.g. Fletcher Building

But there are also relative winners:

  • Increased online retail & logistics disruptions may be positive yet again for Mainfreight
  • Healthcare spending tends to get a boost – so Ebos and F&P Healthcare may benefit
  • Essential consumer goods outlets like My Food Bag have benefited from lockdowns in the past and may do again

Our equity portfolios are overweight healthcare, technology and Australian growth stocks that provide significant diversification away from the New Zealand economy.

We have seen a bounce back in equity prices from past lockdowns, and this time vaccination rates seem likely to be a new feature to monitor more closely. In Australia, we note lockdowns haven’t prevented the equity market making solid gains in recent months.
With NZ in alert level 4, our offices are closed, and our team are all working from home. Please be assured we are still available to help with transactions or queries you may have.
Kia kaha.

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Harbour Asset Management Limited is the issuer and manager of the Harbour Investment Funds. Investors must receive and should read carefully the Product Disclosure Statement, available at We are required to publish quarterly Fund updates showing returns and total fees during the previous year, also available at  Harbour Asset Management Limited also manages wholesale unit trusts. To invest as a Wholesale Investor, investors must fit the criteria as set out in the Financial Markets Conduct Act 2013. This publication is provided in good faith for general information purposes only. Information has been prepared from sources believed to be reliable and accurate at the time of publication, but this is not guaranteed. Information, analysis or views contained herein reflect a judgement at the date of publication and are subject to change without notice. This is not intended to constitute advice to any person.  To the extent that any such information, analysis, opinions or views constitutes advice, it does not take into account any person’s particular financial situation or goals and, accordingly, does not constitute financial advice under the Financial Markets Conduct Act 2013. This does not constitute advice of a legal, accounting, tax or other nature to any persons.  You should consult your tax adviser in order to understand the impact of investment decisions on your tax position. The price, value and income derived from investments may fluctuate and investors may get back less than originally invested.  Where an investment is denominated in a foreign currency, changes in rates of exchange may have an adverse effect on the value, price or income of the investment. Actual performance will be affected by fund charges as well as the timing of an investor’s cash flows into or out of the Fund.. Past performance is not indicative of future results, and no representation or warranty, express or implied, is made regarding future performance. Neither Harbour Asset Management Limited nor any other person guarantees repayment of any capital or any returns on capital invested in the investments. To the maximum extent permitted by law, no liability or responsibility is accepted for any loss or damage, direct or consequential, arising from or in connection with this or its contents.