Harbour Navigator: China on the mend
China’s economic and demographic imbalances have increased during COVID which may pose challenges for long-term growth. However, the near-term reopening of China’s post-COVID economy will likely have profound impacts for many New Zealand and Australian companies.
The Chinese consumer is cashed up with record deposit growth during the COVID era. Although the overall household balance sheet has seen asset price declines, ve...
Harbour Outlook: Investment markets feel the new year cheer
The MSCI All Country World Index returned 4.9% over the month and 6.4% in New Zealand dollar-hedged terms. Sub-sector performance was almost a mirror image of last year, with more defensive sectors, such as utilities and consumer staples, lagging as investors rotated to the more interest rate-sensitive sectors such as consumer discretionary, communication services and information technology.
The New Zealand equit...
Harbour Navigator: How the megatrends influence investment opportunities
Harbour’s core equity portfolios have a “growth” bias. Our investment process has multiple steps which includes assessing key secular trends that are underappreciated. Some people call these themes megatrends.
Secular trends tend to be long-lasting, as they transcend industry shifts and cyclical economic activity, and ultimately lead to sustained growth.
At Harbour our core equity growth investment process has a focus on the...
Harbour Navigator: After the tech reset
Technology and biotech companies are delivering on revenue
After a period when share valuations adjusted to higher interest rates, share prices of fast growing companies are performing following positive announcements on growth
These sectors may be less exposed to a slowdown in household spending and investors may become more comfortable with increasing exposure
As has been well documented, the share prices of long-dated ass...
Harbour Outlook: A volatile month for bond markets, equities follow
The MSCI All Country World Index returned -5.7% over the month in New Zealand dollar-unhedged terms, and -1.8% over the quarter. Returns for the month were slightly less worse in New Zealand dollar-hedged terms, down -4.7% for December. However, the dollar-hedged returns were up strongly (+7.0%) over the quarter.
The New Zealand equity market (S&P/NZX 50 Gross with imputation) held up well relative to other develop...
Top 10 risks and opportunities for 2023
Investment markets generally have many different factors that drive returns, however occasionally there are very few. 2022 will go down as the latter. Inflation was the dominant theme for 2022, creating an unenviable backdrop for bond markets as central banks raised rates to try and combat rising inflation. Equity market valuations fell sharply adjusting to higher discount rates.
While we pointed out the risk of inflation b...
Harbour Navigator: Despite significant falls, NZ houses are expensive relative to incomes
Despite a 12% decline from last year’s peak, we think New Zealand houses are still significantly overvalued based on historically high price-to-income ratios and mortgage repayment costs.
The currently tight labour market is usually a positive influence on house prices but is currently being overwhelmed by very low rates of population growth, high mortgage rates and ongoing increases in housing supply. We expect this dynamic ...
Harbour Outlook: Have we hit peak hikes? Earnings risk to come?
The MSCI All Country World Index returned 0.8% over the month in New Zealand dollar-unhedged terms, and 6.0% in New Zealand dollar-hedged terms.
The New Zealand equity market (S&P/NZX 50 Gross with imputation) finished the month up 1.9%, whilst the Australian equity market (S&P ASX 200) rose 6.6% in Australian dollar terms in the month, and 4.4% in New Zealand dollar terms.
Generally, bond yields fell over the mon...
The RBNZ seeks to “cool the jets”
NZ interest rates pushed higher this week after the RBNZ revealed it now expects to take the OCR to 5.5% given its greater concern about high inflation and a tight labour market.
While this action may bring inflation back towards its 1-3% target band more quickly, it may also push the economy into a deep recession next year.
As the economic damage from higher interest rates becomes more evident, we expect the RBNZ to bec...
Harbour Navigator: Another reason the RBNZ should slow hikes
New Zealand bank funding costs are likely to rise over the next 1-2 years as the Reserve Bank of New Zealand (RBNZ) unwinds its liquidity provision measures introduced in response to COVID-19.
As financial system cash reduces, banks will look to attract alternative sources of funding. Therefore, retail interest rates will likely be pressured higher, independent of any changes in the OCR.
We think this ought to encourage a more...