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RBNZ banking rules shaping credit markets

Changes to banking rules are set to have a meaningful impact on New Zealand’s fixed interest market in 2019:

A proposed rule forcing banks to hold more equity capital will make the banking sector more stable, however, it will come with a raft of second-round impacts. Chief among those will be the impact on banks’ willingness to lend. This is what we are watching most closely;
Separately, we may see an explicit preference for ...

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Simon Pannett | Posted on Feb 1, 2019
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New Zealand equity market debt trends

One of the driving factors behind the global financial crisis (GFC) was high levels of company debt. High leverage and lower earnings coverage of interest costs heightened risk in the US equity market. Recently published research by a global investment bank[i]  suggests that US company debt levels may be creeping up again. But are we seeing the same thing happen in New Zealand?

Research by Harbour indicates that the median N...

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Andrew Bascand, Shane Solly | Posted on Jan 28, 2019
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Core NZ inflation pressures, lifting towards 2 percent

This week saw the release of NZ CPI inflation for Q4 2018.  While headline annual inflation measure remained below 2%, the details showed core underlying pressures a little stronger than expected and continuing to lift to target. Rather than sparking any immediate change in policy direction, in our view, the CPI release will see the RBNZ continuing to “watch, worry, and wait”.

Leading into the CPI release, the market had been...

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Mark Brown | Posted on Jan 25, 2019
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Harbour Outlook: Volatility, more of the same

Key pointsVolatility across global financial markets, which had been building since October, picked up sharply in December.
Many countries, including the US and Australia, are experiencing high employment, solid consumer spending, reasonable business investment trends and mild inflation that should result in a reasonable backdrop for the equity market.
The current environment is likely to remain sensitive to any signs that dom...

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Harbour Team | Posted on Jan 11, 2019
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Take the long-term view: why have equity markets been weak?

Key points
Equity markets have re-traced and become more volatile over the second half of 2018.

Tighter monetary policy has sapped liquidity
Lower liquidity has contributed to higher volatility
Investors have become more bearish
History reminds us that those investors who take a long-term view and invest when equity markets become overly negative are generally well-rewarded when overall market risk tolerance stabilises.

Why ...

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Shane Solly | Posted on Jan 7, 2019
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10 Risks to Watch in 2019

When investing in an uncertain world, it is useful to distinguish between a core view of the most likely outcome for economies and markets, and the key risks that could challenge that assessment.

In our most recent monthly Harbour Outlook we set out our core view. [1] Markets have experienced goldilocks conditions over the past 5 years, with solid economic growth, low inflation and low interest rates. Through 2018 we have see...

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Harbour Team | Posted on Dec 17, 2018
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US earnings season delivers, but raises questions about future growth

Q3 US Earnings season was strong with 410 of the S&P 500 stock index beating consensus expectations. What wasn’t so strong was earnings guidance, which has led the market to downgrade future earnings expectations. While the outlook for US earnings looks less certain, we take some comfort from macroeconomic data which paints a solid picture of economic expansion.

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Chris Di Leva | Posted on Dec 13, 2018
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Harbour Outlook - Volatility Strikes Back

Key points

Financial market volatility has increased in recent months but still remains relatively low by historical standards.
While the macroeconomic data continues to point to a strong US economy, we are expecting the US Federal Reserve to be more cautious and data dependent as they approach more neutral interest rate settings.
While US-China tensions are likely to be a source of volatility as news headlines emerge, we exp...

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Harbour Team | Posted on Dec 7, 2018
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The Third Scenario – The End of Goldilocks

While the RBNZ expects to keep the OCR on hold through 2019 and into 2020, in their past two Monetary Policy Statements they have outlined two alternative scenarios: one with stronger inflation pressures; and another with softer economic growth. In our view, the market is currently underestimating the chances of a third scenario, which is a combination of both stronger inflation pressures and softer economic growth.

One of th...

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Harbour Team | Posted on Nov 15, 2018
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Postcard from Colorado – outdoor retailers

Harbour’s Managing Director Andrew Bascand and Senior Research Analyst Oyvinn Rimer travelled to Denver, Colorado for the Retail Outdoor conference.

Why did we attend the Outdoor Retailer Winter Market?

The Outdoor Economy in the U.S. alone is 3x bigger than the entire GDP of New Zealand
The Outdoor Economy is growing and is a source of global growth
Trade war and tariffs are impacting on the Outdoor Economy directly
Innovat...

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Oyvinn Rimer, Andrew Bascand | Posted on Nov 14, 2018