AUS
NZ
UK
CA
USA
IND
Summary
- As on 19 October 2020, New Zealand’s benchmark S&P/NZX 50 index has gained almost 5% since 1 October 2020 and closed at 12,385.25 points
- The stock market and real estate markets had been buoyant as Labour party’s Jacinda Ardern captured the first absolute majority in the Parliament since the initiation of proportional representation in 1996 in New Zealand election on 17 October.
- The preliminary ANZ Business Outlook survey for October also revealed business confidence lifted by 14 points with more owners being optimistic about their business.
NZX stocks have been rolling to record highs with the housing market flying into a boom mode as NZ had been preparing to go to polls.
In New Zealand election 2020 on 17 October, the centre-left Labour party of Jacinda Ardern roared to a landmark electoral win, becoming the first single-party government since the introduction of proportional representation in 1996. Labour and Jacinda have received an absolute majority and authority to govern New Zealand alone.
ALSO READ: Elections amid the virus crisis - a glance at US and NZ elections
NZX benchmark Index up ~5% in October
The New Zealand stock market had been witnessing an upward growth in October as election days neared. As on 19 October 2020, New Zealand’s benchmark S&P/NZX 50 index has gained almost 5% since 1 October 2020 and closed at 12,385.25 points.
On 17 October, the Labour party secured 64 of the 120 seats (as per Preliminary results) in the Parliament and is expected to lead the second term. voters rewarded the party’s success in combatting the COVID-19 pandemic. The centre-right National party drew 25 seats with Greens getting only 10 seats.
Ardern vowed to use her majority win to fast track economic recovery plan that its government had already begun to implement. She has gained international attention after imposing one of the world’s strictest lockdowns while following an elimination strategy.
Though the economy witnessed its most severe economic contraction since the Great Depression, with the economy slumping 12.2% in Q2, the lockdown erased the community spread of COVID-19 and restrictions were relaxed much quicker than other countries.
DO READ: Elections around the corner - How is NZX entering October 2020? Few Sectors to look out for
Many small measures, such as helping small businesses, drawing foreign investment, increasing investment in preparing young kiwis for trade and encouraging tourism, were included in the Labour manifesto.
ALSO READ: NZX Stocks that benefited due to online spending wave in New Zealand
Uptick in Business Confidence and real estate market indicating market optimism
ANZ Business confidence lifts
The preliminary ANZ Business Outlook data for October witnessed an extensive upturn in the forward-looking activity indicators.
Some of the results of other ANZ Preliminary activity indicators included the following:
- General business confidence and own activity rose by 14 points and 9 points to -14.5% and 4% respectively compared to the prior month.
- Investment intentions remained muted while employment intentions increased by 9 points compared to September, with just 3% of the firms proposing to lower employment.
- Profitability expectations increased 9 points to a net -15% compared to the previous month, with expected costs 7 points higher at 42.4%.
- A net 9% of businesses reported lower activity, up by 10 points from September and a net 17% posted lower staff numbers than a year ago, an improvement of 4 points from the prior month.
As per the survey, key tests for the economy lie ahead with the winding down of the wage subsidy and the lost summer for tourism.
ANZ Preliminary activity indicators for October 2020
Image Source- © Kalkine Group; Data Source: ANZ, dated: 8 October 2020
Housing market booms in September
The housing market snubbed all forecasts of a slowdown in the housing market in September. The country and Auckland witnessed record volumes and sales in September disregarding the usual break in prices and volumes in the lead-up to an election.
As per REINZ data released on 13 October, the number of residential properties sold in September jumped by 37.1% from 2019 to 8377, highest number of properties sold in NZ for over three years.
The REINZ house price index for NZ rose 11.1% annually to 3145 with the index crossing the 3100 mark for the first time. Prices were also steadier with the national median price reaching a new record of NZ$685,000 in September, up by 14.7% from a year earlier.
REINZ Chief Executive, Bindi Norwell stated that high confidence in the housing market, elimination of loan to value ratio and the concern that prices will continue to increase were the reasons that clarified why investors would go so far to purchase a property.
INTERESTING READ: Heartland Bank Creates History by launching NZ's lowest Home Loan rate
As per ANZ Bank Chief economist, Sharon Zollner, the uncertainty that comes in an election year had been solved in advance as a lot of frightening things have been ruled out already.
She also added that the business confidence is rising even as borders remain closed, the tourism industry is devastated, imposing risk of high unemployment. This may be because the election outcome remained clear with firms knowing their expectation form Arden.
