Lessons from RBOHA
On 8 October, a large number of retail investors will breathe a sigh of relief, as they receive their principal of $900m back on what was New Zealand’s largest retail bond issue when launched ten years ago. It has been a bumpy ride for these investors. Many lessons have been learnt. In a world of low yields and interest rates, they will face one remaining question of how best to put their principal back to work to generate inc...
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Changing Political Landscapes
Key developments In August, against a backdrop of rising geo-political tensions, many Australasian companies announced their half year or full year financial results; the impact of disruptive technologies was evident in many profit announcements.
We caution on reading too much in the aggregate company profit results, as increasingly the divergence in results is becoming obvious. For instance retail, media and telecommunicatio...
NZ Election: Down to the No.8 Wire
The New Zealand election on 23 September may come down to the (No. 8) wire. By international standards, both National and Labour-led governments appear relatively centrist, without large policy differences. However, New Zealand equity market valuations are full, meaning that the market may become increasingly sensitive to changes in macro-economic settings, uncertainty and change. Some investors may want to be patient and see ...
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Quantitative Investment Styles and when they perform
Factor investing as a style has become increasingly popular in the last decade with the rise of Smart Beta funds globally. These strategies are expected to outperform the market over the long term. Each different strategy selects companies based on favourable characteristics defined by the strategy. There are many different factors such as risk based factors (value and size) that command a premium, fundamental factors (growth ...
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Low Inflation and Solid Earnings Growth
Key developments At the end of June, bond and equity markets were briefly rattled by concerns that central banks were readying the market for the removal of stimulus. Comments from the US Federal Reserve, European Central Bank, Bank of England and Bank of Canada had almost seemed co-ordinated, pointing to a shift in focus from the threat of deflation to the prospects of reflation.
Through the course of July, equity markets n...
Investment Implications from Electric Vehicle Momentum
It has been hard to miss recent headlines relating to the progress of electric vehicles (EVs) and the
phasing out of the internal combustion engine (ICE) that powers the majority of today’s cars.
In May, Daimler announced the funding of its first European battery plant for its future Mercedes
EVs. Last week, Volvo announced that all its new-model cars will have an electric drivetrain by 2019;
a mix of hybrids and pure EVs. Ov...
Raising Inflation Targets?
At the press conference following the US Federal Reserve (US Fed)’s most recent interest rate decision, Governor Janet Yellen made an admission that marks a significant change in tone from the US Fed. She acknowledged that the debate over whether to raise inflation targets is “one of the most important questions facing monetary policy”[1], and encouraged further research. While we still believe there is a low chance of the US...
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RBNZ: Inflation, What Inflation?
At yesterday’s Monetary Policy Statement (MPS) release the Reserve Bank of New Zealand (RBNZ)
genuinely surprised financial markets, by assessing that the economic data received since February had a
neutral impact on the appropriate stance of monetary policy. While in the lead up many commentators
had focused on the recent jump in annual Consumer Price Index (CPI) inflation, the RBNZ’s response
could be summed up as “what infl...
Beware a 2019 Recession
Some superstitious investors worry about the chance of a global recession in 2017. They figure that the stockmarket crash in 1987, Asian crisis in 1997 and start of the GFC in 2007 make this the obvious year for troubles in markets. While it is difficult to find an economist that will forecast a recession, the maturity of the business cycle does warrant some caution. However, first we need to see more signs of consumer pr...
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