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Focus

Forsyth Barr Focus presents a perspective on key market dynamics. These are designed to highlight issues we believe are particularly relevant for long-term investors, and to focus on opportunities that will benefit portfolios in the years ahead. If you have any questions, your Forsyth Barr Investment Adviser, supported by our research team, is available at any time to provide you with further insight and advice.

Investing Outside the Public Domain: Why Private Markets Are Worth Considering

14 November 2024

Private markets are one of the fastest growing areas of the investment universe. Investors have been attracted by the strong returns and diversification benefits they have delivered. There are trade-offs, most typically a lack of liquidity, a long investment horizon, and uncertainty around timing of returns. In our view, however, for many investors the benefits private markets provide outweigh the costs.


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US Election 2024: Trump Triumphs

8 November 2024

America has voted and Donald Trump is hired (again). Following a highly contested and historic election, Trump has reclaimed the presidency with a decisive mandate, winning not only the required electoral college votes but also the popular vote. Although some votes remain to be counted, Trump has already secured a clear victory, convincingly over the 271 electoral college votes needed to clinch the presidency.


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Interview with Precinct Properties’ CEO Scott Pritchard: Laying Foundations for Future Growth

07 October 2024

Many people’s first thought of Precinct Properties is as the owner of prime office buildings. Office, as a sector, has had its challenges, particularly through COVID. What is the state of the office market today, and how are things like working from home impacting your business?

There’s definitely a two-tiered market in both Auckland and Wellington. What we’ve seen since COVID is a real flight to quality. Businesses have recognised that in order to optimise their workforce’s productivity, they are better off having their workers in the office the majority of the time.


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Community Finance: A Win-Win for Investors and Our Community

07 October 2024

New Zealand’s acute housing deficit is one of the country’s most pressing social and economic challenges. A shortage of affordable homes has fuelled skyrocketing property prices and soaring rents impacting thousands of New Zealanders, particularly low and middle-income families. Equally, genuine impact investment opportunities in New Zealand, that allow investors to address a tangible and pressing need while also earning a financial return, are rare. Community Finance provides the bridge between investors, who want to make a positive difference with their capital, and Community Housing Providers, who utilise this capital to deliver affordable housing solutions across the country.

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Foundations for the Future: Investing in Infrastructure

24 September 2024

Infrastructure is a cornerstone of economic growth and development for any nation. Often things we take for granted – driving to work, turning on our lights, or using our cell phone – requires robust infrastructure. It is essential for fostering economic resilience, competitiveness, and driving sustainable growth.

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Interest rate cuts rolling in

27 AUGUST 2024

The New Zealand economy has been bouncing in and out of recession for the past 18 months. Households and businesses are experiencing a significant slowdown, while at the same time, the government is tightening its purse strings. It’s clear that lower interest rates are needed to revive demand. With inflation finally easing, the Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) from 5.50% to 5.25% in August. Interest rate markets are pricing the OCR to fall to 3% by the end of 2025.

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US Election 2024: Stars, Stripes and Stocks

24 JULY 2024

As the US election nears, US political twists and turns will have an increased impact on certain stocks and sectors, and broader markets in general. Given the rapidly changing landscape (and we still have more than three months to go!) and broad range of policy uncertainties, it’s understandable if investors feel a little confused and unsettled. It’s important to remember, however, that while elections can create short-term market volatility, during these periods of heightened political focus markets typically tend to overemphasise the importance of politics on the market’s performance over the long-term. Markets have done well under both Republican and Democrat leadership, including the last eight years under both Presidents Trump and Biden.

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The End of High Cash Rates is Nigh

15 JULY 2024

After several years of relatively high interest rates, we seem to have reached a turning point. Recently, the Reserve Bank of New Zealand (RBNZ) signalled that the Official Cash Rate (OCR) is likely to move lower sooner rather than later. Over the past few years, favourable interest rates have been available for term deposits and savings accounts, leading many people to park their money in the bank. However, as interest rates are set to decline, keeping funds in the bank will soon become less appealing. This might be the right time to consider whether cash investments still hold value, given their historically lower long-term inflation-adjusted returns compared to other assets.

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Tiwai Point: 20 More Years

03 JULY 2024

In late May 2024, three electricity deals to keep the lights on at the Tiwai Point aluminium smelter beyond 2024 were completed, after almost two years of negotiation. The smelter is New Zealand’s largest electricity consumer, using 5TWh a year, or around 12% of New Zealand’s electricity, so it is a big deal. The supply contracts are important not only for the Southland community, but the wider electricity sector. The contracts come at a time when electricity demand is growing for the first time in 15 years.

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Aged care: Demographics is Destiny

04 JUNE 2024

If Demographics is Destiny, the outlook for New Zealand aged care companies is promising. Over the next 15 years, the number of 85+ year-olds in New Zealand will double and more than one in four of these people will need aged residential care. The uncertainty around these estimates is very low; the future 85+ year-olds are 70+ years-old today.

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Responding to Trust Tax Changes: Not as Easy as PIE  

19 APRIL 2024

Effective 1 April 2024 the tax rate for most trusts lifted from 33% to 39%, not an insignificant change. Understandably, many are now asking, should they change how they structure their investments? Also somewhat understandable is some of the advice circulating — shift to a PIE. In our view, however, this response is overly simple and ignores the raft of other factors you should consider when choosing your investments.

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Auckland Future Fund   

11 APRIL 2024

Auckland Mayor Wayne Brown has proposed establishing a regional wealth fund, the Auckland Future Fund, to manage some of the city’s assets. There are details to be worked through, but on face value we believe the idea has merit. No doubt some will say “of course Forsyth Barr is a supporter, they’re an investment firm”. And our response: “who would think that a fund that grows the city’s wealth over the long-term, diversifies the city’s assets, and provides benefits to Auckland and Aucklanders isn’t a good idea?”

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We're only human   

5 APRIL 2024

Last week psychologist Daniel Kahneman passed away, aged 90. Kahneman, alongside his Israeli compatriot Amos Tversky, pioneered the study of behavioural economics. The pair explained how people’s decision-making is not completely rational and how it’s affected by biases and heuristics (mental shortcuts that are hardwired into our brains). These biases and heuristics are extremely useful for navigating everyday life, but unfortunately, they are less helpful when it comes to successful investing.

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Interview with Don Braid of Mainfreight  

8 MARCH 2024

Mainfreight was born in 1978 as a no-frills, low cost freight service using the government-owned Coastal Trader weekly run between Auckland, Christchurch and Dunedin, and a Bedford truck. Since then it has been an outrageous success story, expanding its logistics services and geographical footprint across global markets, consistently winning new customers, and delivering market leading earnings growth since listing on the NZX in 1996.

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Peak to peak: Record highs are business as usual for markets  

29 FEBRUARY 2024

The last few years have been a real rollercoaster ride for investors. After the COVID crash in early 2020 — the fastest bear market (defined as a -20% decline) in history — markets bounced back rapidly only to get hit by another bear market in 2022. However, since the October 2022 low, markets have improved, and particularly so in the latter months of 2023 and early 2024.

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ESG: Charting the course of change 

12 FEBRUARY 2024

Forsyth Barr has updated its Carbon, Environmental, Social, and Governance (C&ESG) ratings for New Zealand companies. One year on and we find companies are making robust commitments, strengthening policies, and making sustainability practices business-as-usual, despite geopolitical tensions and volatile market conditions.

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The Wisdom of Charlie Munger

1 DECEMBER 2023

Charlie Munger, one of the true investing greats, passed away this week at the age of 99. Charlie partnered with Warren Buffett over decades to build Berkshire Hathaway into the US$780 billion conglomerate (and eighth largest company in the world) it is today.

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Coalition tweaks and turns  

29 NOVEMBER 2023

Seven weeks is a long time in politics, but that's how long it took to get a coalition agreement sorted between National, ACT and NZ First. Now that we've arrived at this juncture, the new government brings forth a series of policy augmentations and adjustments as a result of the coalition negotiations with ACT and NZ First.

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Weighing the GLP-1 Impacts  

9 NOVEMBER 2023

One of the big market stories of 2023 has been the sudden rise of GLP-1 weight loss and diabetes drugs. Healthcare is not normally a sector we associate with high volatility: that has changed this year. Hype around the potentially massive opportunity for GLP-1 drugs has seen the stock prices of their developers, Novo Nordisk and Eli Lilly, soar.

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Cash Isn't Always King 

6 NOVEMBER 2023

Interest rates from the likes of bank accounts and term deposits are the highest they’ve been in well over a decade. In contrast, investment markets have been bumpy with recent returns modest at best. It’s understandable why some are starting to ask “Why bother with markets? Why don’t I just keep all my money in the bank?” We do think it’s reasonable to hold a bit more cash than normal at the moment. But investors should remember that, over the long-term, stock markets have performed well in high and low interest rate environments and, over the long-term, sitting in the “safety” of cash has been detrimental to your wealth.

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The AI-mazing Race: The Rush for Artificial Intelligence 

24 OCTOBER 2023

Artificial Intelligence (AI) has been the en vogue topic for markets in 2023. While it’s been ChatGPT and large language models that have grabbed the headlines, AI is much broader, encompassing a wide range of technologies.

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China's Economic Challenges: From the Tiger's Roar to a Lingering Cold 

26 SEPTEMBER 2023 

China has long been a key driver of the global economy, but more recent headlines have depicted a less rosy picture. China’s economy is grappling with some significant challenges, including slowing growth, a struggling property market, a potential debt crisis, and escalating trade tensions with the West. Once considered an unstoppable force, China now faces an uncertain economic future.

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Embracing Uncertainty

20 SEPTEMBER 2023

This year has been another sharp reminder that investing means embracing uncertainty. When you make any investment — whether in stocks, bonds, property, or your own education — you are doing so on the expectation of future benefits. However, no matter how much in-depth research you’ve undertaken you can’t fully protect yourself against one key thing — the inherent uncertainty of the world in which we live.

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Ballots and bulls - Do elections impact financial markets?

11 SEPTEMBER 2023

Every three years New Zealand engages in the dance of the politicians, known as our General Election. Elections are often regarded as significant events, with the potential to shape the direction of a nation’s policies and priorities. Given the attention and suspense they generate, the actual impact of elections on local financial markets is worth examining.

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Reflecting your values in your investment portfolio

4 AUGUST 2023

Incorporating a sustainability lens when considering investments is growing in popularity. Globally, we are seeing more and more investors wanting to align their investment portfolios with their values. Increasingly the request is to allocate capital towards positive solutions that are tackling environmental or social problems. But, in reality, these types of investment options can be limited and everyone’s values are different. In this article we discuss how you can reflect values in your portfolio while also meeting your investment objectives.

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An investment seesaw: The ups and downs of property syndicates 

20 JULY 2023

Property, arguably, is a national obsession in New Zealand. For many, it’s a key plank of their investment portfolios. While residential has generally been the focus, over the past decade low interest rates combined with regulatory and tax changes has driven a surge in the popularity of commercial property. This included more than NZ$1 billion being invested in unlisted commercial property vehicles over 2020 to 2022.

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Stocks vs. Property: The House Doesn't Always Win 

29 JUNE 2023

Many Kiwis have a love affair with investment property. It is easy to understand why. Residential property prices have boomed, up about sevenfold over the past 30 years. Annual house price growth of around +7% has only modestly lagged the share market but has been delivered with less volatility along the way. You can also fund part of the investment with debt, further boosting the return on equity.

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Debt Wars: A game of political chicken

17 MAY 2023

The United States Government debt ceiling debate has reared its ugly head again. Markets are watching closely. While we think a last minute agreement between the rival US political parties will very likely be reached, there is an outside chance (like in any game of chicken) neither side blinks and we see a political and economic pile-up.

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Cracks in the Kiwi Nest Egg

4 MAY 2023

New Zealand recorded its largest ever current account deficit over 2022. The current account is the balance between what we as a country earn and what we spend. In fact, over the 35-year period that we have been measuring the current accounts we've only had deficits - we are a net (and increasing) borrower from the rest of the world. In the short-term this isn't much of an issue - overseas investors remain happy to lend us money or buy our assets. Over the long-term, however, it does pose economic risks to the country and is another reason why diversifying investments beyond New Zealand is a good idea.

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March Madness: Banking Tremors Cross the Atlantic

22 MARCH 2023

Ructions across the global banking sector has spread to Europe. On the heels of the collapse of Silicon Valley Bank and Signature Bank, the biggest US bank failures since the Global Financial Crisis, Credit Suisse has been rescued by Swiss rival UBS. The failure of one of the world's 30 systemically important banks is both remarkable and disconcerting. That said, all the banks that have failed in recent weeks faced idiosyncratic issues that are not widespread across the industry. Credit Suisse had been plagued by a series of scandals which had undermined customer confidence in the bank. While further failures are possible, even likely, we do not expect the crisis will become systemic across the industry.

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Infratil: An Infrastructure Forerunner

22 MARCH 2023

Infratil was founded by the late Lloyd Morrison in 1994 to invest in and manage infrastructure assets critical to the New Zealand and Australian economies. It was one of the world’s first listed infrastructure funds. Infratil’s initial focus was on energy and airports. Today, its investment portfolio has broadened to include renewable energy, transport, healthcare, telecommunications, and data centres across New Zealand, Australia, and around the world. Over the past nearly three decades Infratil has delivered a highly impressive 18.7% p.a. return for shareholders. We talk to Infratil’s CEO, Jason Boyes.

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The Chips Are Down: Silicon Valley Bank Failure

15 MARCH 2023

The collapse of Silicon Valley Bank over the weekend was the biggest US bank failure since the Global Financial Crisis. The bank was the 16th largest bank in the US and had branches across the world, including in the UK, China, Europe, India, Canada, and Israel. Regulators have jumped in with efforts to prevent contagion across the banking sector and economy.

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When it rains it pours: Cyclone Gabrielle a further challenge for the New Zealand economy

23 FEBRUARY 2023

Since the start of 2023, New Zealand has been battered by two storms in as many months. Severe flooding in Auckland over Anniversary weekend caused damage to thousands of properties. Clean-up operations in the City of Sails were just beginning in earnest when Cyclone Gabrielle wreaked further havoc across the North Island. The pictures and reports are shocking. For those impacted, you have our sympathies.

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New Zealand tourism: 100% Pure at 70% Capacity

7 FEBRUARY 2023

COVID-19 border closures in March 2020 took tourism, one of New Zealand's most important industries, from hero to zero literally overnight. The next couple of years of tight border controls and periodic domestic lockdowns was painful for a sector reliant on international visitors. While robust domestic tourism, together with some government assistance, helped the industry during the COVID years, the industry significantly downsized as many tourism operators either folded and/or laid off staff.

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ESG: How New Zealand companies measure up

21 DECEMBER 2022

Forsyth Barr has published its inaugural Carbon and Environmental, Social and Governance (CESG) ratings for New Zealand companies. The ratings help to build confidence in companies’ long-term outlooks and to identify areas of risk beyond traditional financial analysis that warrant further investigation.

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House prices are tumbling... and that's okay

14 DECEMBER 2022

New Zealand’s extreme house prices have been exposed by rising mortgage rates, tightened bank lending, and a building boom that’s finally delivering enough houses. House prices have already experienced the largest nominal decline on record, down an average of -14% across the country. We suspect there is more to come. While the adjustment will be painful — and we do have sympathy for those who bought near the peak — a correction is needed and should benefit the economy longer-term.

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Cryptocalypse: The Wild West of financial markets

24 NOVEMBER 2022

Leading financial news headlines over the past week has been the collapse of FTX, the world’s third largest crypto exchange. The pace of unravelling was stunning — in the space of a few days FTX has gone from a leader in the crypto economy with a US$32 billion valuation to bankruptcy with up to US$10 billion of customer deposits missing. The exact details behind the exchange’s collapse are still being uncovered, however, it once again emphasises that crypto is the Wild West of financial markets where speculation and scams are rife and investors aren’t afforded the protections they have in traditional asset classes.

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Investor beware: Self-inflicted pain can hurt the most

22 NOVEMBER 2022

If you asked "what's the biggest driver of an investor's long-term returns?" we suspect most people would guess it's which investments they own or how the overall market performs. These obviously do have a significant influence. However, there is another factor that studies conclude is even more important - how an investor behaves, or more accurately, how they manage their emotions.

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Investing Fads: Hazardous to Your Wealth

1 NOVEMBER 2022

US bank JPMorgan recently published data highlighting that the average US retail investor's portfolio was down -44% so far this year (with the value now sitting below the level it was at the beginning of 2020 before COVID hit). While it's undoubtedly been a tough year in US markets - the S&P500 index has fallen -21% this year-to-date, while the tech-heavy NASDAQ is down -31% - the magnitude of retail investor losses are still surprising. Why have retail investors, on average done so much worse than the market? We suspect it's due to retail investors' unfortunate and costly tendency to chase investment fads.

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Riding the Inflation Rollercoaster

6 OCTOBER 2022

Markets continue to whipsaw. Concerns around inflation, and potential recession, are front of mind. Central banks are committed to bringing inflation down to target levels. But what will it take to get there? How far will interest rates rise? And will it require a recession? By their own admissions central bankers don't know. Outcomes will be affected by unpredictable factor such as the war in Ukraine, China's perseverance with a zero-COVID policy, and the continued blockages in global supply chains. Unfortunately, uncertainty and market volatility may run for a while yet.

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An interview with David Mair - CEO of Skellerup

23 SEPTEMBER 2022

For most people if they know anything about Skellerup at all it's that they make the iconic Red Band gumboots. There is, however, a lot more to the company. Skellerup designs and manufactures components and products that are used in a huge array of industries including water, construction, marine, sports fields, healthcare, automotive, dairy, and forestry, just to name a few. The company has operations around the world including New Zealand, the United states, China, Vietnam, and Europe. Over the past few years Skellerup's share price has been one of the strongest performers on the NZX. We talk to CEO, David Mair.

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The Blue Economy

1 SEPTEMBER 2022

Aquaculture is the farming of finfish, crustaceans, molluscs, algae, and other aquatic organisms. Unlike capture fisheries, aquaculture is not exposed to declining wild fish populations as a result of climate change, and has been the key growth driver of global seafood production over the past 50 years.

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Q&A with Katie Beith 

25 AUGUST 2022

Katie has been in the ESG (Environmental, Social, Governance) industry for almost 20 years, with the first part of her career spent overseas, predominantly in the UK. On returning to New Zealand in 2015, she joined New Zealand Super Fund as a Senior Investment Strategist for Responsible Investment. In November 2021, Katie joined Forsyth Barr as the Head of ESG to take on the responsibility of incorporating ESG principles into the company’s firm wide operations and investment process, including assisting advisers with specific client needs. We talked to Katie about how her first year is progressing, the media hype around ESG, and how Forsyth Barr is building capabilities in this quickly evolving space.

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Bear Up, Bear Markets Don't Last Forever

26 JULY 2022

It’s official. Last month global stock markets officially hit bear market territory. For most, watching investment portfolios decline sharply is disconcerting. It’s okay if you have questions and concerns — you are not alone. At such times it’s easy to be tempted to batten down the hatches and remove all risk. While avoiding sleepless nights is important, it’s a balance. History highlights long-term investors are better to be positioned for bull markets than hide from the bears.

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More Than Ever, Focus Matters

17 JUNE 2022

Investors in financial markets have experienced a turbulent week in expectation (and experience) of increasing inflationary pressures and rising interest rates in many economies. Over the course of this week, for the first time since 1994, the US Federal Reserve increased the federal funds rate by 75 basis points, while the S&P 500 index of US shares fell more than 20% from the high reached in January this year, signifying a “bear market”.  Given heightened market volatility and investor anxiety, now more than ever, focus matters.

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Sunny side up

27 MAY 2022

Solar is about to become part of New Zealand’s generation mix. One hundred and seventy three thousand terawatts of solar energy strikes the Earth continuously — more than ten thousand times the world’s total energy use. But, when it comes to New Zealand’s electricity market’s transition away from fossil fuels, solar has long been spurned in favour of alternatives such as geothermal and wind. However, over the past 18 months there has been a tectonic shift in view. We’ve seen a flurry of announcements of intentions to build grid-scale solar that has now reached about 8.75 terawatt hours (TWh), the equivalent to around 20% of New Zealand’s current electricity consumption.

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How rising interest rates impact your bond portfolio 

20 APRIL 2022

Typically investors think about bonds as being the stable safe part of their portfolio. Over the past 18 months or so this hasn’t been the case and bond prices have seen some of their sharpest falls in history. This is a good news and bad news story. While the market value of bonds has fallen, for investors who plan to own them to maturity these “losses” on bonds aren’t permanent – they will still receive the same interest on their investment and be repaid in full when the bonds mature. Furthermore, those investors reinvesting their money today will receive a higher return going forward.

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An interview with Jolie Hodson - CEO of Spark 

1 APRIL 2022

Despite the rapid growth in the use of their services, telecoms generally haven't been a great hunting ground for investors over the past decade or so. Companies have struggled to balance the rapidly changing industry and the need to continually invest in new technologies, with delivering appropriate returns to shareholders. Notwithstanding this challenging backdrop, Spark has delivered as one of the best performing telcos globally.

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Lessons from the world's worst investor 

25 MARCH 2022

This is a tale about John Smith, the world’s worst (or maybe just unluckiest) investor. Before you feel too sorry for John, don’t worry, we’ve made him up! In reality it would be hard to be as bad or as unlucky as John even if you really tried.

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Russian roulette: Where to from here? 

28 FEBRUARY 2022

Russia’s invasion of Ukraine is shocking. It is Russia’s first military engagement in Europe since 1945. Sadly the early signs are that the fighting will be bloody. Russia’s effrontery clearly emphasises the world has become a much more fractious place and geopolitical shocks are on the rise. That said, whilst the human cost of the Ukraine invasion is tragic, we expect the economic cost will most likely be contained and the market’s current heightened concerns will ease.

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History (sometimes) Repeats 

25 FEBRUARY 2022

My mother was born 200 kilometres north of the current Ukrainian border, in an area once part of Poland, now part of Belarus. In 1940, she and her family were deported from their rural home to a forced labour camp in Siberia by the Soviet Red Army. Trauma and privation are intricately woven into the historical narrative comprising this part of the world.

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Markets not having the happiest new year

28 JANUARY 2022

For investors in equity markets it has been a tough start to the new year. In fact, in the United States — by far the largest equity market in the world, the S&P500 index has had the worst start on record dating back to 1929. No one enjoys watching the price of their investments jump around, so it’s understandable if some investors feel unsure and nervous. Unfortunately, however, volatility in markets is normal. It’s the price we pay to earn higher returns over the long-term.

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New Zealand’s housing market: Built of bricks or built of cards?

21 JANUARY 2022

On any measure New Zealand house prices are extreme. Even before we’d ever heard of COVID-19 there was much consternation about the country’s “housing crisis”. Since COVID hit, house prices have soared and unaffordability has gotten worse. Much worse.

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Spotlight on Climate Change: Closing the gap between rhetoric and action 

20 DECEMBER 2021

In November, governments met (and underwhelmed many) at COP26. Throughout the year, frustrations at the slow pace of action spilled over into the streets and the topic of climate change made its way into boardrooms, courtrooms and parliamentary sittings.

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The Tricky Transition to Sustainable Energy 

23 NOVEMBER 2021

The world is pushing to reduce carbon emissions and energy markets are set for significant change, with electricity a key benefactor as transport and industry seek non-fossil fuel energy sources. However, renewable electrification of the globe is not straightforward and comes with significant challenges.

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Good COP or bad COP?

5 NOVEMBER 2021

Over the past 20 months or so the global community’s focus has been on combating the COVID crisis. For two weeks (at least) it will shift back to the slower-moving challenge of climate change.

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Inflation soaring like it's 1989

21 OCTOBER 2021

This week the Consumer Price Index (CPI), New Zealand’s principal measure of inflation, hit 4.9%. Outside of when oil briefly exceeded US$140/bbl in 2008 and the impact of GST hikes in 2010, you’d have to go back to the late 1980s to see headline inflation at higher levels. New Zealand isn’t the only country facing heightened inflation pressures, but we are near the front of the pack. Economically, we are a small open nation, which, prior to COVID, had largely relied on migration to drive economic growth. While shut borders and supply chain disruptions are impacting countries everywhere, the impact here has been even more pronounced.

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An Index is no more than a 'Rule of Thumb' 

17 SEPTEMBER 2021

A share market index measures the performance of a basket of stocks. Indices are an important tool in financial markets. They are used to calculate the performance of a market; active investors often benchmark their performance against an index, and passive investors generally try to replicate the performance of an index.

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Long live the home office? 

31 AUGUST 2021

The return to Alert Level 4 lockdown has seen the majority of the workforce resume working from home, which, once again, brings the future of the office back into the spotlight. There has been much discussion around what offices will look like in a post-COVID-19 era, with many predicting a reduction in demand for office space. While we believe there will be a change to the way we work, we still see a future for the office in the modern workplace.

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Delta Blow  

19 AUGUST 2021

New Zealand has been hit with its first community outbreak of COVID-19 in six months. That it comes in the form of the Delta strain raises the risks. Delta is significantly more infectious than earlier variants and has become the dominant strain of COVID-19 around the world. There is good news and bad news for New Zealand investors. The good news is vaccines are still proving to provide a high level of protection against new variants meaning, whilst they might slow the global economic reopening, they hopefully shouldn’t derail it. The bad news. New Zealand is the least vaccinated country in the Organisation for Economic Cooperation and Development (OECD).

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Interest rate rises: New Zealand racing for gold or silver 

23 JULY 2021

Last week market expectations for New Zealand interest rates shifted sharply. It now looks like a two-horse race over the next couple of months between our Reserve Bank and Norway’s Norges Bank as to who will be the first developed market central bank to hike rates in a post-COVID world. In contrast, earlier this month, the Reserve Bank of Australia reiterated its “central scenario” remains that it doesn’t expect to hike rates until 2024, while the United States Federal Reserve’s projections are it will commence with hikes in 2023. How has New Zealand found itself at the head of the pack to tighten monetary policy?

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A Changing Climate

25 JUNE 2021

The Climate Change Commission’s (CCC) final report to the government, Ināia tonu nei: a low emissions future for Aotearoa, outlines a view for New Zealand that, if adopted by the government, will dramatically reshape the country over the coming decades. It clearly signals that the road to carbon neutral 2050 will be one driven in an electric vehicle and lined with charging stations where petrol pumps now stand.

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Lending with Purpose

11 JUNE 2021

Last month Precinct Properties issued the latest “Green bond” in the New Zealand fixed income market. Precinct joins a growing list of companies that have opted for this relatively new type of financing. In this article we unpack some key issues around the increasingly common issuance of Green, Social, and Sustainability (GSS) bonds and how they can help investors incorporate responsible investment, sustainability, and Environmental, Social and Governance (ESG) objectives into their fixed income portfolios.

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Global Supply Chains: Containing the Issue

20 MAY 2021

With modern-day shopping reduced to a few clicks of a button it can be easy to forget the logistical challenge involved in delivering a package to your doorstep within a few days — not to mention sourcing all the raw materials to produce the product. March’s Suez Canal blockage, caused by the jammed 400m-long Ever Given, brought the importance of global supply chains to the attention of many. Supply chains, however, were already stretched to the limit long before this.

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Portfolio Diversification: Unpacking the Free Lunch

30 APRIL 2021

Portfolio diversification is a core principle of long-term investing and has been called the only free lunch in finance. What does that mean?

The primary goal of diversification is not higher returns, but to minimise the risk and volatility (the free lunch) of a portfolio for a given long-term expected return. We unpack why diversification is one of the key tools in an investor’s toolbox. 

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Crossing the ditch in a bubble

1 APRIL 2021

Prime Minister, Jacinda Ardern, is due to announce the timing of two-way, quarantine free, travel between New Zealand and Australia on Tuesday, 6 April. The proposed ‘trans-Tasman bubble’ has been on the cards since May last year but repeatedly scuppered by new COVID-19 outbreaks on both sides of the Tasman and seemingly less desire from our government, until now. Mounting political pressure appears to have hastened it into action. Excluding the prospect of further community outbreaks on either side of the Tasman or a worsening of the current situation in Queensland, we foresee a two-way bubble opening before the end of April.

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Government 'cracking down' on housing 'speculators'

25 MARCH 2021

This week the Government released a policy package to address New Zealand’s “housing crisis”. In our view elevated house prices is principally a supply issue — the population has grown quickly, and the provision of new homes has failed to keep pace. The policy package does include some initiatives to help supply, but the focus is on the demand-side, specifically targeting investors who own around 35% of New Zealand’s residential properties. It seems likely these policies will encourage some investors to switch from housing to other asset classes and, at very least, cause house price growth to slow. Ultimately though, more supply-side solutions are required.

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One-two jab: Virus on the back foot, but not a knock-out blow

10 MARCH 2021

COVID-19 vaccines are being rolled out around the world. New Zealand’s vaccination programme is now officially underway. Today around 320 million people globally have received at least one dose. The good news is the early evidence suggests that vaccines are at least as effective as the clinical trials concluded. Optimists may be forgiven for therefore thinking the end of COVID-19 is in sight. Unfortunately however, whilst vaccine rollouts are undoubtedly a positive step in the fight against the virus, we do not expect they mean a return to a pre-COVID world any time soon. 

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Sleepy Joe causes a power surge

15 FEB 2021

The last two months have been a wild ride for the share prices of two New Zealand electricity companies, Meridian Energy and Contact Energy. Over recent weeks the GameStop saga (see last week’s Focus article) captured global headlines of how a band of Redditors took on short seller hedge funds, causing wild swings in some companies’ share prices. Closer to home, the case of Meridian and Contact presents another way stock prices can diverge from underlying value.

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GameStop: An entertaining sideshow

10 FEB 2021

Market news headlines over the past couple of weeks have been dominated by a tug-of-war between an army of retail investors (using social media and online trading platforms) and some short-seller hedge funds.

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Funding for Lending

4 DEC 2020

In response to the economic shock of COVID-19 and part of Reserve Bank of New Zealand’s (RBNZ) ‘least regrets’ strategy, a new ‘tool’ is being rolled out next week, which will see the major banks able to access funding at extremely low rates of interest.

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The Three Vaccineers

26 NOV 2020

The last few weeks has seen a flurry of positive news on COVID-19 vaccines. The potential impact of these vaccines (and possibly others) on economies and companies are front of mind for investors. 

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From Housing Gloom to Housing Boom

19 NOV 2020

Back in April, economists were grabbing news headlines with predictions of sharp house price declines. The housing market typically does not do well in a recession, and closed borders shut the door on demand from new migrants. Economists, however, could not have been more wrong. In October we saw house prices hit record highs in every region of the country. Why was economists’ pessimism so misplaced?

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Markets Pfizzing on vaccine hopes

10 NOV 2020

Overnight, pharmaceutical company Pfizer with biotech partner BioNTech announced that the initial phase III trial results have found their COVID-19 vaccine to be “more than 90% effective”.

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You're fired?

6 NOV 2020

Although not said with the same conviction as the former The Apprentice star, it appears President Trump will likely be removed from office. But, in the highest turnout election since 1900, the results were closer than betting odds and many polls predicted. It’s been a roller-coaster few days, with both parties claiming victory and President Trump spreading (or more accurately, tweeting) accusations of voter fraud. 

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The Red Pill or the Blue Pill

30 OCT 2020

The markets’ attention next week will squarely be on the US election.

Will Democrat Joe Biden oust Republican incumbent Donald Trump from the Presidency? Will the result be clear on the day, or will we have to wait days or even weeks to know for sure? Will we see a “Blue Wave” with Democrats sweeping the Presidency, Senate and House of Representatives, or will Congress remain split?

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Every cloud has a (tech) silver lining

25 SEP 2020

“Like it or not we live in interesting times. They are times of danger and uncertainty; but they are also the most creative of any time in the history of mankind” Robert Kennedy. 

54 years on, as we grapple with the first global pandemic in over a century, Robert Kennedy’s words still seem as relevant as ever. It’s easy to feel overwhelmed by negative headlines and doomsayer predictions, but history teaches us good times usually follow bad. And bad times have often been the catalyst for a step change in research, discovery, and innovation.

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Bonus Bonds - The house was the winner

4 SEP 2020

1970 — The Beatles released their final album ‘Let it Be’, Brazil became the first team to win the FIFA World Cup three times, pirate radio station Radio Hauraki was finally awarded a license, and the New Zealand Government launched Bonus Bonds through the Post Office Savings Bank.

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Lockdown déjà vu, but not for the NZX

14 AUG 2020

After 102 days of no community transmission of COVID-19 in New Zealand, our largest city Auckland, with around a third of the country’s population and about 38% of GDP, is back in lockdown. Clearly this will come as a bitter disappointment to most but isn’t really a huge surprise.

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Twice Halved

3 AUG 2020

Does anyone in financial markets care about Covid anymore?  Looking at the performance of the US sharemarket, one could be forgiven for thinking not.

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Injection of optimism in the search for a vaccine

27 JUL 2020

Over the past few months, we’ve been inundated with medical jargon and talk of a COVID vaccine. Every day seems to bring news around a potential vaccine or medical treatment. Markets are increasingly optimistic a medical treatment will be found. With a recent string of more tangible news, are we finally starting to get some real traction?

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Power cut for Tiwai smelter

10 JUL 2020

Nearly a half-century ago, in November 1971, the then Prime Minister of New Zealand Keith Holyoake flew to Invercargill (with a small number of cabinet ministers in support), to open the aluminium smelter at Tiwai Point. 

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KiwiSaver and the magic of compounding returns

3 JUL 2020

When KiwiSaver started in 2007, there was a stampede to sign up. There was the $1,000 kickstart dropped into your account and that, along with the contributions from government and employers, had people asking “why wouldn’t you?” There was no sensible answer to that question and so people joined in droves. (There are now over 3,000,000 members).. 

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Ryman Healthcare: An interview with Gordon MacLeod

26 JUN 2020

Ryman Healthcare is a New Zealand success story. It is the country’s largest retirement village and aged care operator, and in 2014 it opened its first village in Victoria, Australia, where it continues to expand. Ryman listed on the NZX in 1999, raising NZ$25 million at a market capitalisation of NZ$135m. Since then it has grown to now be valued by the market at NZ$6.5 billion. 

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Mainfreight: Special People, Special Company

19 JUN 2020

Mainfreight listed on the NZX on 14 June 1996, at 96c per share. Since then, and after adjusting for a 1 for 10 bonus issue in 2002, its share price has climbed by an average annual compounded rate of +17% before accounting for the added benefit of dividends. It has the second highest (marginally behind Ryman Healthcare) total shareholder return of any stock on the NZX since initial public offering (IPO) that has been listed since 2000. For every NZ$1 invested in its IPO, investors would now have a whopping NZ$149 compared to a little under NZ$10 if they’d put the same NZ$1 into the market index. Read more about the Mainfreight story...

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Investing or speculating?

12 JUN 2020

Overnight we saw the largest drop in equity markets since 13 March. Investors’ pursuit of safety has pushed up the price of defensive assets.  The yield on United States 10-year Treasury bonds has tightened from 0.95% to 0.65% over the last week (remember, when bond prices rise, the yield on offer falls).

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The changing face of retail

5 JUN 2020

Lenin said nothing can happen for decades, and then decades can happen in weeks. Although not quite a decadal shift, there is no doubt that the COVID-19 pandemic has pulled forward the future of retail. Consumer purchasing behaviour has changed, effectively overnight. While many consumer behaviours will revert once the COVID-19 threat eases, we expect that recent changes in the way people shop could prove enduring.

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Are negative interest rates on the way?

29 MAY 2020

The concept of “negative interest rates” is one many of us will struggle to comprehend. Will I have to pay the bank to hold my cash? Will the bank pay me to have a mortgage? These two common questions almost seem surreal, however, the reality is that not much is likely to change. Negative retail interest rates for both depositors and borrowers are still very uncommon in countries that have negative central bank interest rates.

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Accelerating the digital revolution

22 MAY 2020

Lockdown measures around the world have forced many people and businesses to change how they communicate, how they buy and sell goods and services, and how they spend leisure time. While we expect most will largely return to previous ways of living and working once restrictions are lifted, we do expect some lasting change.

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Budget 2020 - The Government responds to a global pandemic

15 MAY 2020

"Houston we have a problem”, might well have gone through Grant Robertson’s mind as he crafted the government’s 2020 Budget in response to the COVID-19 global pandemic. Like most of the world, New Zealand has been severely impacted as the virus placed extreme pressure on the global economy. Few escape when borders are closed and non-essential businesses are shut-down for several weeks. Because the Budget was drafted at the height of a crisis, it’s unlikely to be perfect.

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Trade War 2.0

8 MAY 2020

Although Covid-19 dominates the headlines, the US Presidential election, due November 3rd, creeps closer. The election looked tight before the Virus Crisis. Now it’s on a knife edge. A tight race and rebounding share market may tempt President Trump to reignite a trade confrontation with China too, amongst other things, emphasise his global heft to voters. 

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The gang’s all here: “Mr Market”, “Tina” and “FOMO”

1 MAY 2020

Well, for most of us it’s been a unique month. We’ve been isolated within our bubbles, maybe socialising over Zoom, binge-watching Netflix, home-schooling the kids, or (by the looks of it) desperately craving takeaways. And, if you hadn’t noticed, equity markets had their strongest month in over 33 years.

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Contain or eliminate?

24 APRIL 2020

A COVID-19 mass vaccination campaign is unlikely for at least a year to eighteen months. But an antibody therapy or experimental vaccine that’s proven safe may be available sooner, and be able to be produced in sufficient quantities to protect high-risk people. Regardless, New Zealand’s goal to eliminate the virus has implications for our economy, with major implications for businesses that rely on demand from sectors such as travel, tourism, education, and migrant labour. 

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A post-pandemic world

17 APRIL 2020

Signs are emerging that the global infection rate from COVID-19 may have peaked. While some countries are further ahead than others in the battle against the pandemic, the overall trend is looking more promising.

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Will Tina Play an Encore?

9 APRIL 2020

The past week has been a good one for equity markets, responding to slowing new COVID-19 cases in hot spots like Italy, Spain, and potentially New York. Here in New Zealand, it appears the lockdown is working – fingers are crossed that measures may be eased sooner rather than later.

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Living in a bubble

3 APRIL 2020

It really is quite remarkable how quickly the world can change. Two months ago most New Zealanders were happily enjoying summer. Most of us had never heard the terms coronavirus, social distancing or self-isolation before. Today we’re living in our bubble, hoping it’s only for three more weeks, but nervously suspecting it might be longer. The future is uncertain. If it wasn’t, investing would be easy.

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Understandable anxiety

20 MARCH 2020

For the vast majority of people, the current COVID-19 crisis is unprecedented. The human and societal impacts are sobering. Financial market volatility has remained extreme. Investor anxiety at such a time is entirely understandable. And it is human nature to want to seek safety. History firmly underlines that acting on these instincts is detrimental to long-term investment returns.

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Copyright Forsyth Barr Limited. You may not redistribute, copy, revise, amend, create a derivative work from, extract data from, or otherwise commercially exploit these publications in any way. These publications have been prepared in good faith based on information obtained from sources believed to be reliable and accurate.

Any recommendations or opinions in these publications are general in nature and do not take your personal circumstances into account. For personalised financial advice contact your Forsyth Barr Investment Adviser.

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