New Zealand
Comment of the Day

May 02 2012

Commentary by Eoin Treacy

New Zealand

Eoin Treacy's view In the aftermath of the Christchurch earthquake New Zealand has had to engage in a rebuilding program and interest rates have been held static at 2.5% for the last year. The Trade Weighted New Zealand Dollar Index has been largely rangebound, albeit with a mild upward bias since late 2009. It recently encountered resistance in the region of the 2011 peak and potential for an additional pullback has increased.

The NZSE 50 Fully Gross (4.62%) hit a new recovery high today and a sustained move below 3350 would be required to question medium-term scope for additional upside.

Property Trusts are also among the best performers in the New Zealand market. AMP NZ Office (5.84%) completed a two-year base in February and while overbought in the very short term, continues to extend the breakout. Goodman Property Trust (6.63%) remains within its base but has held a progression of higher reaction lows since 2010.

In the residential healthcare sector Ryman Healthcare is becoming increasingly overextended and is susceptible to a reversion toward the mean.

In the telecoms sector, Telecom Corp of New Zealand (11.6%) has been trending highs since mid-2010 and completed its base in March. While somewhat overbought in the very short-term a sustained move below NZ$2.15 would be required to begin to question medium-term scope for additional upside.

It is notable that the same sectors are outperforming in both Australia and New Zealand. A number of the trends evident in the above charts are at a more developed stage than those in Australia. This may be because monetary conditions have been easier for longer in New Zealand. If that is the case then the New Zealand market may offer a template for how Australia will perform if interest rates continue to fall.

Back to top