Outlook: Low Local Interest Rates
Key developments
In September we saw a continuation of the theme of low local interest rates in New Zealand, in a broader global environment where bond yields overseas have crept higher. This provided support for the local fixed interest and equity markets, while the NZ dollar remained at its recent low levels.
The tone in global markets has remained relatively cautious, with worries about trade tensions, pockets of strain ...
Global Equity Growth: Investment Opportunities in the global market - T. Rowe Price
Scott Berg has developed an incredible investment performance history at T. Rowe Price since taking the helm of the Global Equity Growth Fund nine years and eleven months ago. Today, T. Rowe Price manages more than $1.5trn New Zealand dollars. There is a trend towards more concentrated global equity portfolios. With 130 to 150 stocks from across more than 30 countries, Scott’s portfolio bucks this trend. Diversification is a key tenant of Scott’s philosophy and is underpinned by his admission that he expects to get a handful of projections wrong each year. Scott made a number of projections for 2017 that didn’t transpire, yet the NZ PIE Fund outperformed its benchmark by over 10%; fairly strong support for Scott’s approach...
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Harbour Navigator: Postcard from China - The eCommerce growth model
I visited China last week and met with companies and commentators to dig beneath the data and get a sense of the current issues.
We visited many malls and shopping centres. In particular we went to mother and baby stores to experience the consumer in action, and witnessed the new eCommerce model. We also visited “wet markets”, hired bicycles with WeChat, and saw progress with a2’s new Chinese-labelled product. We saw first-ha...
Harbour Outlook: Crisis of confidence
It was a strong month for absolute returns in New Zealand asset classes in August, with the NZX50 sharemarket index rising around 4.4% and the NZ Government bond index generating a return above 1.2%. This strong performance of financial markets sat in sharp contrast to the continued weakness of New Zealand business confidence, which is shaping the political and policy-making environment.
As usual there was a laundry list of global developments highlighting the ongoing risks to the global backdrop: heightened US trade tensions, this time with Canada; wobbles in the Italian banking sector and sovereign bond market; emerging market strains in Turkey and Argentina; and political changes in Australia generating the 5th prime minister in five years. Despite these developments and headlines, global macroeconomic data, particularly in the United States, continued to show a picture of solid actual economic activity running near economists’ expectations...
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Continued growth of responsible investment in New Zealand
The Responsible Investment Association Australasia (RIAA) has recently published their fourth annual New Zealand Responsible benchmark report[i] that shows the size and growth of responsible investing in New Zealand over the 2017 calendar year.
Harbour is delighted to have been included for the third consecutive year as one of four domestic asset managers that are using a leading approach to Environmental, Social and Governa...
Harbour Investment Horizon: Fiscal Policy Outlook
There is growing coverage in the media that a slowing economy could force a fiscal tightening to stay within the government’s fiscal responsibility rules.
There is little evidence that the market is concerned with this risk, with the New Zealand government bond yields trading below the US for the first time in 25 years.
While providing important political discipline, there is also some flex in the fiscal responsibility rules, ...
Harbour Navigator: Regime Change at the RBNZ
The path of least regret for the RBNZ appears to be letting core inflation rise above 2%.
A broad interpretation of the mandate motivates actions to support growth and business confidence.
As the new regime beds down there may be more volatility in the rates and FX market, with a new voting committee still yet to come in 2019.
In last week’s Monetary Policy Statement (MPS), the RBNZ surprised markets by shifting the projected ...
Harbour Outlook: Slowing growth and rising inflation
Key developments
In recent months, we have highlighted how the New Zealand economy and markets seem at a crossroads, with a moderation in domestic economic activity whilst cost pressures appear to be rising. With further evidence of this scenario playing out in July, we look into the implications for the rates market through monetary and fiscal policy, as well as the impact on New Zealand equity valuations.
But first, looki...
Harbour Navigator: Deflationary risks in New Zealand abating
A key theme for the New Zealand economy in 2018 has been the potential crossroads facing the economic outlook. For the past 5 years, we have seen strong economic activity and low inflation keeping interest rates low and asset prices high. However, looking forward there are signs that economic activity is moderating at the same time as inflation pressures are emerging.
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Tariff Wars
A muted global market reaction so far?
With no further escalation, the implications for New Zealand from the current US-China tariff war are likely to be limited. Any escalation, however, will have a significant impact on global growth, company earnings, the stock market and the general appetite for risk. Already, some sectors may be more impacted via supply chain disruption, competitive pricing changes and the economic spill...