Interest Rates Race to Zero?
Yields on fixed interest securities, which have been falling sharply all year, took another surge lower last week. The 5-year swap rate, a good proxy for market rates in New Zealand reached 1.36%, down from 2.20% at Christmas 2018 and 2.65% a year ago. That’s a record low level for NZ bond yields. The primary catalyst last week was a signal that the US Federal Reserve is close to cutting rates. They are joining the central ban...READ MORE
Responsible investing and equity returns
There is a growing awareness that stock returns are influenced by Environmental, Social and Governance (ESG) considerations. As a long-term proponent of incorporating ESG factors into our assessment of companies, Harbour is delighted to have been involved in Armillary Private Capital’s annual review of returns of the NZ listed sector for 2018 that was released last week.
This is Armillary Capital’s ninth annual Return on Cap...
Harbour Outlook: Trade tensions impact global growth
Global equity markets retraced from their highs in May with the MSCI World index (in local currency) returning -6.0%. Risk aversion picked up almost entirely due to the breakdown in trade talks between the US and China. This resulted in the US increasing tariffs on US$200 billion of Chinese goods; China promptly retaliated.
New Zealand and Australian equities weathered the volatility in global markets well...READ MORE
5G to enable new technology platforms
Investors need to factor in the opportunity and potential disruption of new technology and changing consumer preferences for mobile and fixed broadband communication. Fifth generation mobile networks (5G) provide a transformational shift in the telecommunications landscape. Why is this change so important?
It enables new technologies, like driverless cars, mobile medicine, the Internet of Things
It may accelerate the transiti...
Housing Market Risk Reduced
"Dad still can’t work out how he got it so cheap. It’s worth almost as much today as when we bought it".
- Dale Kerrigan, from cult Australian Film, The Castle
With the median Melbourne house price down 10% from its peak, many Victorians will be envious of the value held by Darryl Kerrigan’s Strathmore home. And even more envious Sydneysiders with house prices down 15% in the largest city (according to Core Logic).
Harbour Outlook: More bright spots emerge
Global equity markets continued to strengthen in April with the MSCI World index (in local currency) returning 3.8%. Markets were buoyed by the trifecta of a strong US earnings season, signs that Chinese stimulus have had a positive economic impact and, perhaps not unrelated, eurozone growth rates coming in above expectations...READ MORE
Harbour's Submission to the RBNZ on the Proposal for Changing Capital Adequacy
Submission to the RBNZ on the Proposal for Changing Capital Adequacy for New Zealand BanksHarbour has written two short research papers on the RBNZ’s proposal to lift capital held in New Zealand by banks (see here and here). These reports highlighted that higher lending rates, lower deposit rates and potentially lower risk-weighted asset growth could be expected outcomes that might be associated with lower investment and GD...READ MORE
Harbour Macro Research Day
In recent years, Harbour’s internal six-monthly Macro Research Day has been an important part of our research calendar. It provides an opportunity to undertake a thorough review of the medium-term outlook for the macroeconomy and its implications for fixed interest, equity and multi-asset portfolios.
Our Macro Research Day last week commenced with presentations by economists from two of New Zealand’s largest banks discussing key drivers of the New Zealand economy. This included business confidence and the potential impact of the Reserve Bank capital requirements which has recently been one focus of our research agenda.READ MORE
Harbour Outlook: Records broken
Global equity markets continued to strengthen in March with the MSCI World index (in local currency) returning 1.6%, bringing the return for the quarter to 12.6%. Markets were buoyed by a dovish statement from the Fed, whose “patient” approach is unlikely to see any rate rises for some time. A “great” trade deal has been touted between the US and China, which has breathed further life into investment markets...READ MORE
Bond yields hit record lows; but a rate cut is not a done deal
New Zealand government stock yields fell to record low levels across all maturities last week, as the Reserve Bank acknowledged the weaker global economic outlook and the ensuing risks to the domestic economy. We think:
The economy has slowed but is still growing.
Bond yields appear to be pricing in a recession, which seems unlikely.
Rate cuts in New Zealand are not a done deal.
The decline in yields has been dramatic this ye...