The novel coronavirus has outstripped the already downgraded outlook of the global economy in 2020. With business sentiments hurt, economies striving to maintain forecasts, share markets on a sell-off spree, macro and microeconomic hits and a health crisis like no other, COVID-19 has shown the world that a virus is mightier than the seven continents!
We are now forced to be confined in the four walls of our homes - a measure much needed to contain the virus spread. As country lockdowns become a norm and social distancing is the new normal, the world will possibly be resonating with our feeling that we currently are characters in a Black Mirror episode, just with a difference that this is reality!
But the investing world, once it acknowledged the fact that the virus had intentions to plague every business momentum, has gradually showed signs of a recovery, though sporadic hits have continued to make investors nervous.
Let us graze through how the New Zealand share market is reacting to the virus fears and if there are any pockets of opportunity-
The New Zealand Share Market - Promising Prospect in APAC
For decades, New Zealanders have been deemed to be the world’s greatest travellers, always open to thrill, excitement and new experiences. Their enthusiasm also reflects in the share market - be it them being on either side of it. Not only are New Zealanders avid investors, the country offers a hoard of investing options to domestic as well as international investors.
The NZX Equity Market (NZSX) is the leading market for the country’s listed equities and funds. Some of New Zealand and Asia Pacific's highly profitable and dynamic firms can be easily tapped in this market. There are around 180 listed entities with a market cap of over NZ$138 billion.
Moreover, to ensure that the market is well connected to New Zealand investors, NZX owns Smartshares, New Zealand’s only issuer of listed Exchange Traded Funds (ETFs), and KiwiSaver provider SuperLife.
Why Invest in New Zealand?
There was a mighty swell in businesses willing to invest in different countries across the world with the dawn of liberalisation and globalisation. Adhering to the trend, the New Zealand government began (and continues) to thrive and invite investors to invest in its market. The objective has always seemed clear - offer ample opportunities to businesses across the globe to invest in the country.
Over time, investing in the land of the kiwis has evolved as a process of total renaissance of businesses. Today, New Zealand is a highly efficient and a market-driven economy. We have three reasons for you that affirm that New Zealand is surely one of the best places to invest:
Strong Economic Fundamentals
Economic stability, inclusive free-trade agreements (with countries such as Singapore, Thailand and China), a free and independent media ensuring high level of transparency, and an effective government support for investment keeps New Zealand at the top of the investing game. A stable economy that is well-positioned for long term international competitiveness and privatization of several utilities and state services makes it one of the most efficient and competitive friendly economies in the world.
A tech-savvy nation, New Zealand has all the essential infrastructures that are required to commence and maintain a business. A chain of extensive road and rail transport systems, effective inter island links, privately run deep water ports, international airports, energy self-sufficiency, advanced telecommunication and frequent science and technological innovations are the icings on the cake that make the country a lucrative investing hub of the APAC region, where quite a few economies are still working on their infrastructure developments.
Competitive Business Costs
Not only is the process of starting a business one of the easiest and simplest across the world, it is also very quick. Also, Industrial construction costs and office rental rates are one of the lowest amid the developed economies of the world. The liberal energy sector of the country, backed by the natural resources sector, offers one of the lowest electricity costs for industrial purposes.
These facts have always garnered investor interest in the country as they find business prosperity sustaining well in the market- an indication that returns will always be fruitful.
The Pandemic Impact
New Zealand, like many other economies of the world, is currently locked down to curtail the impact of the virus. As per a JHU CSSE dashboard, current confirmed COVID-19 cases stand at 950 (as on 04 April 2020). There has been 1 reported death, but on the modest bright side, 127 recovery cases have also been confirmed in the region.
It is true that no matter how well-placed economies might be in the current scenario, COVID-19 has not failed to wreak havoc in business and investing sentiments across the world. New Zealand has not been left unimpacted by the dire consequences of the virus and has faced big falls. However, it has not failed to surprise investors by pulling back its string. Let’s tell you how-
On 03 April 2020, the share market remained mildly positive as the country accomplished the first full week of its lockdown stance. The benchmark S&P/NZX50 was up by 0.65% (64 basis points) at 9935. The S&P/NZX20 was up by 0.61% at 6,786 whereas the S&P/NZX10 traded in green as well, up by 0.35% at 10,525.
The lift can be attributed to companies that made efforts to strengthen their balance sheet and fend off the uncertainties, like Outdoor equipment retailer Kathmandu Holdings Limited. The Company has recently completed the institutional entitlement offer component of its fully underwritten 1.2 for 1 pro-rata accelerated entitlement offer and its NZ$30 million placement, wherein approximately NZ$207 million will be raised.
There is another factor that should not be ignored - New Zealand’s Central Bank, the Reserve Bank of New Zealand (RBNZ), has been taking measures that support the stability of the financial system, for example, restricting all locally-incorporated banks from paying dividends on ordinary shares and preventing them from redeeming bond issues to maintain higher levels of capital. The Bank is also offering these banks with support to help them continue lending to businesses.
As deciphered, investor sentiment does seem to be building positively in the New Zealand market, a fact that is much welcome amid the virus-struck market volatility. What one needs to do is be vigilant of the businesses and tap long term investments that seem fruitful, depending upon one’s risk appetite.