Investment Horizon: Top 10 risks and opportunities for 2023 – A mid-year reflection
At the risk of jinxing things and, barring a few weeks in March where the collapse of Silicon Valley Bank looked like it could create broader risks for the banking system, the first half of 2023 was relatively uneventful. Particularly when compared to the corresponding periods
in 2020 and 2022.
After a year of negative returns for both bonds and equities, “the scores on the board” look healthier for both. Equities have bou...
Investment Horizon: On the ground in China – the key shifts needed to counter strong bearish sentiment
Senior Research Analyst Øyvinn Rimer presents his noteworthy insights and discoveries from a recent visit to China, where he visited more than 30 companies spanning diverse industries. Despite prevailing pessimism, certain winners emerged, and indications suggest an imminent shift towards a favourable upturn.
China property, prospective policy and iron ore – how low can it go?
After a long four years, we were finally back on ...
Harbour Outlook: AI: the fourth industrial revolution?
The conflict between observed inflation and soft lead indicators for economic activity continues to influence interest rates and economic forecasts. While some central banks may pause from raising rates, the overall balance of risks tilts towards tighter financial conditions. Investments with robust fundamentals and manageable debt levels are preferred in this environment.
It was a weak month for Australasian marke...
Harbour Navigator: Global trends in taxonomies and what it means for New Zealand
Increasingly, countries around the world are developing sustainable finance taxonomies to classify environmentally friendly economic activities and prevent false claims of sustainability (“greenwashing”).
Europe has taken the lead in establishing a green taxonomy, and other countries like Australia are also making progress in this area.
New Zealand is beginning to explore the possibility of implementing its own sustainable...
Harbour Navigator: Is inflation sticky?
After an aggressive RBNZ tightening cycle, the New Zealand economy is likely to enter recession later this year.
Inflation, however, is unlikely to quickly return to the RBNZ’s 1-3% target range and involves three broad steps – supply chain normalisation, lower housing costs and a drop in wage growth. Only the first step is complete.
We expect the RBNZ to increasingly recognise the impact of its rapid rate hikes to highly...
Harbour Outlook: Catch-22 - Inflation vs. Earnings
At a headline level, stock markets appear to be in a “catch-22”, digesting lower inflation numbers while trying to assess how much of this inflation is down to lower growth, which may then flow through to earnings. See more under ‘what to watch’.
New Zealand equities and bonds both delivered strong returns over the month, with the S&P/NZX 50 Gross index (with imputation credits) returning 1.1% and the Bloomberg NZ ...
Harbour Navigator: New Zealand's external reliance is in the spotlight
New Zealand is a small, open economy with a heavy reliance on the rest of the world for export revenue and funding.
The funding reliance is particularly acute currently as our tourism sector isn’t generating its normal amount of foreign revenue, pushing our current account balance to its largest deficit on record, almost 9% of GDP.
While our current account balance should improve as tourists continue to return to New Zea...
Harbour Outlook: Financial conditions starting to pinch?
The MSCI All Country World Index returned 2.1% in New Zealand dollar terms, and 2.5% in New Zealand dollar-hedged terms. At the sub-sector level financials lagged after events in the US and European banking sectors early in the month. The aftermath saw investors shift towards ‘Big-Tech’ sectors such as information technology and communication services.
The New Zealand equity market (S&P/NZX 50 Gross with imputati...
Harbour Navigator: Chinese economic recovery accelerating
Less than six months ago the Chinese economy was partly locked down with COVID restrictions and commentary remained bearish across a range of industries.
Fast forward to now and Chinese non-manufacturing purchasing managers’ index (PMI) readings are pointing to a very solid recovery in Chinese economic activity from 2022’s COVID lockdowns.
A core indicator, the China non-manufacturing PMI for March of +58.2 was well up fro...
Harbour Navigator: Fortress Australia
The banking system in Australia has multiple points of difference compared to the US, all pointing to a greater capacity to weather financial and economic stress. What we heard in our visit to Australia this week was exceptionalism and resilience in the banking system.
“A show of force” is how the Australian Financial Review subsequently described their Summit. In previous years you might have heard the regulators bemoan the ...