Harbour Navigator: Is bank lending too cautious?
You might think that our title is provocative, and a fringe view. But this was a consensus question from investors and analysts after our research visit to Australia in the week before Easter.
Regulation has encouraged bank lending to become more conservative, more housing focused and increasingly outsourced through broker channels.
Regulators seem to want even less bank risk and more financial stress tests.
As a result…
Harbour Navigator: Interest rate pain intensifies
Lenders have experienced only modest defaults on loan portfolios, underpinning an argument that monetary policy is yet to really bite.
However, we note arrears and KiwiSaver hardship withdrawals are rising before loan losses are felt, demonstrating consumer stress, and portending further spending reductions.
Unemployment is typically the final penny to drop, and indicators of the labour market suggest consumption will contin…
Harbour Navigator: Climate Clarity - Developments in climate and sustainability reporting
Many New Zealand listed companies will be reporting against new climate disclosure regulation for the first time this year.
The U.S. SEC has recently approved new mandatory climate reporting rules, following in the footsteps of New Zealand and other countries.
Globally, sustainability reporting standards have been developed under the newly formed International Sustainability Standards Board, involving the consolidation of ex…
Harbour Outlook: Transition Period for Markets
Key market movements
The MSCI All Country World Index (ACWI) continued its positive run with a 5.4% return in New Zealand dollar-unhedged (4.7% in NZD-hedged) terms for the month. From a sector perspective performance was broadly positive, with utilities the only negative sector at -0.8%. Leading the way was consumer discretionary at 7.8% and information technology at 6.1%.
In contrast local market returns for the month wer…
Harbour Navigator: New Zealand households to remain challenged
New Zealand households have experienced a significant increase in their cost of living over the past four years, led by higher interest rates, transport, food, and housing costs.
Total consumption has been able to grow 8.5% over this time due to large increases in household income and wealth, alongside record net migration.
The per capita picture, however, is much weaker and likely reflects the impact of monetary policy tigh…
Harbour Outlook: Bumps in the road on the way to lower rates?
Key market movements
The MSCI All Country World Index (ACWI) started the year off with a 3.5% (1.3%) return in New Zealand dollar-unhedged (hedged) terms for the month. From a sector perspective performance was mixed, with information technology leading the way at 3.2%, followed by communication services at 2.9% and healthcare at 2.2%. On the other side of the ledger materials was the worst-performing sector at -5.4%, whilst u…
Harbour Navigator: Time to revisit banking in New Zealand?
“The only thing worse than a very profitable banking system is a very unprofitable banking system.”
- Jonathan Mott, 2010, from his presentation to the Australian Senate Economic References Committee inquiry into Competition within the Australian banking sector
Major bank profitability as measured by return on equity is not exceptional compared to history or alternative listed investments.
Further strategic moves seem like…
Harbour Outlook: Strong finish to the year, but can it continue?
The US Federal Reserve performed an unexpected dovish pivot at its December meeting and markets now anticipate a "soft landing" where inflation returns to 2% without the Fed having to inflict severe economic damage, opening the gates for a flood of cash into equity markets. The so-called ‘Fed pivot’ saw capital markets quickly focus on when and by how much the Fed and other central banks would cut interest rates. After a lower-than-expected core inflation reading capital...
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Top 10 Risks and Opportunities for 2024
When establishing our core investment views for the near- and medium-term, we are conscious that markets often skew towards tail risks, and also towards factors that are already observable but uncertain.When our research team considers technology disruption in sectors and the macro-environment, we have to be aware that the range of outcomes may provide investment opportunities as markets can react both slowly to news and rapid…
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Harbour Navigator: Understanding the RBNZ’s recent hawkish shift
The Reserve Bank of New Zealand (RBNZ) surprised many at its November Monetary Policy Statement (MPS) with a more hawkish view of recent economic developments. While we don’t necessarily view the skew in economic risks the same way, we recognise the high degree of uncertainty in the economic outlook and the importance of understanding the central bank’s point of view.
At the heart of the RBNZ’s hawkish shift are two factors: h…
