Booster Client Update - NZ has a King/Queenmaker: How does this affect portfolios?
NZ has a King/Queenmaker: How does this affect portfolios?
As many predicted, the provisional results of the election see Winston Peters assume the role of king (or queen) maker. It’s hard to tell exactly what he’s after in his negotiations (we’ve lost count of the number of “bottom lines” he has). He also poses nine different scenarios on how the new Government could look, so to make any investment decision based on this level of uncertainty would be akin to a form of gambling. In saying that, looking back at past elections can help indicate whether this uncertainty is likely to have any market impact.
Looking back, the New Zealand dollar can go through a bit of volatility over periods of uncertainty but the New Zealand share market generally isn’t too affected by the outcome. Usually it stays on the pre-election path, and this is how it appears to be playing out (it’s risen 4% over the last three months). Individual industries can be affected though, depending on the policies. For example, last election, the LabourGreens policy of establishing a single buyer of electricity saw the share prices for electricity generator companies fall heading into the election.
This time round, National have pledged $5b to infrastructure, including road and other transport-related projects, which should benefit construction companies. Labour has a heavy focus on housing affordability, which would likely affect companies sensitive to house prices (e.g. the retirement village operators).
So, what about NZ First? As mentioned, Winston has a number of “bottom lines”, ranging from reducing immigration and restricting foreign freehold land purchases, to creating a state asset buy-back programme. It’s hard to tell what National and Labour may need to agree to in order to form a majority government.
Nonetheless, we remain confident in how your portfolio is positioned, and will watch with interest as the situation unfolds. The outcome may bring some new, exciting opportunities.
A look back at when the world feared the worst
On August 2, 1990, the world woke up to a grim headline: “Iraq Invades Kuwait; Oil Prices Soar, Markets Plunge.”
Saddam Hussein's forces had crossed into Kuwait, triggering fears of a prolonged conflict in the oil-rich Middle East.
The immediate market reaction was swift and severe.
Lifetime Book Club: The Let Them Theory
In a world where we spend so much energy trying to control outcomes, manage other people’s opinions, and keep everything on track, this book offers a different approach. One that suggests peace comes not from controlling more, but from letting go.