Market backs voters

September 22, 2014

The share market reacted positively to the election result:

New Zealand shares jumped, led by MightyRiverPower, after the National Party’s convincing election victory on the weekend wiped out any regulatory fears for the power companies. Meridian Energy, Genesis Energy and Contact Energy paced gains.

The NZX 50 Index advanced 54.947 points, or 1.1 percent, to 5236.292. Within the index, 27 stocks rose, 13 fell and 10 were unchanged. Turnover was $144.2 million. . . .

“The market is buoyant and led by the power companies, which is not a surprise, given the regulatory risk declined with the National party coming into power again,” said Shane Solly, director at Harbour Asset Management. The return of the National government means a” a consistent framework and more of the same” giving the market certainty.  . .

The market likes certainty.

Business does too and it’s good not just for businesses but the jobs which depend on them.


No change good, change bad

March 19, 2014

Share market investors put their money on yesterday’s poll results:

The NZX 50 Index rose to a new record, following a global rally, paced by power companies after recent political polls put the government ahead, helping dispel fears the opposition parties will be able to overhaul the electricity sector. MightyRiverPower, Meridian Energy and Contact Energy rose.

The benchmark index rose 47.638 points, or 0.9 percent, to 5135.664. Within the index, 27 stocks rose, 12 fell and 11 were unchanged. Turnover was $167 million.

Better than expected US industrial production figures kicked off a global rally in equity markets which carried on into Asia. Hong Kong’s Hang Seng was up 0.5 percent in afternoon trading, Japan’s Nikkei 225 index advanced 1.4 percent and Australia’s S&P/ASX was up 0.5 percent.

Power companies paced today’s gains after a New Zealand Herald’s DigiPoll survey put the governing National Party at 50.8 percent support ahead of the September election. Labour, the main opposition party, garnered 29.5 percent. A key election policy of the opposition parties is to regulate the electricity market, creating a single state-owned wholesale electricity buyer. . .

“The electricity sector is up, and I’m going to put it down to the Herald DigiPoll results which were published, because they’re up across the board,” said Greg Easton, investment adviser at Craigs Investment Partners. “If there is no change in government, then that sector could really outperform after the election.” . . .

If no change in government good the obvious implication is that a change of government would be bad – and not just for energy companies and the stock market.


Labour will meddle in power market

January 17, 2014

Labour is planning to follow through on its policy to meddle in the power market if it is in government:

. . . Labour and the Greens unveiled plans to overhaul New Zealand’s electricity market on the eve of the government’s MightyRiverPower selldown last year. The operator of nine hydro stations on the Waikato River has traded below its $2.50 IPO price since just after the sale last May.  Meridian Energy, sold in October, is hovering around its listing price.

The opposition parties want to create a single, state-owned power buyer and a restructured pricing model, to eliminate excessive power company profits and pass savings onto consumers through cheaper electricity prices.

“A wise investor will be aware if the pricing model changes, in this case to stop the profiteering of public rivers, that will change the companies’ profits,” Parker, who would be finance minister in a Labour government, told BusinessDesk.

“Investors are already discounting those stocks because of what might happen if we win,” he said. “It’s actually a good example of how the market works.” . . .

If they can reduce the value of companies and the wealth of investors this much when they’re in opposition, they will do much worse in government.

Investors have already assessed the threat. The New Zealand stock exchange energy group index, which includes all listed power companies along with Z Energy and NZ Refining, has dropped 9.6 percent in the past 12 months, while the NZX 50 Index has rallied about 17 percent.

“Some people just won’t touch them because they are scared of a Labour-Greens government,” said Mark Lister, head of private wealth research at Craigs Investment Partners. “Others say because they’re dirt cheap people are pessimistic. If National got re-elected they’d go up again.”

A potential change of government may pose risks to other sectors as well, he said.

“Regulatory risk is weighing on those sectors which could be in for attention from a Labour government,” Lister said. “The market is aware of the sectors susceptible to regulation – SkyCity, the electricity sector and Chorus have a cloud hanging over them, which will continue to the election.” . . .

If there’s a Labour/Green/New Zealand Firs/Mana and whichever else party after the election that cloud will darken.


Rural round-up

March 8, 2013

The sheep industry outperforms Fonterra. True or false – MIiking on the Moove:

Sheep farmers receive 44% of the retail price of their products. So if a portion of lamb retails for $100 the farmer will receive $44.

The sheep industry is struggling with low profitability. The last 20 years has seen sheep farms converting to dairy because they offer a higher return.

Among sheep farmers, there seems to be an attitude that their meat companies are doing a poor job of marketing & selling lamb, both domestically and internationally.

There is a cockiness among dairy farmers around the returns the dairy industry are making. They seem to think the reason for the industries success is because they have an outstanding level of awesomeness and that the people running Fonterra posess superior business acumen, compared to the sheep industry.

I often hear both sheep and dairy farmers comment that, if the meat industry could just replicate Fonterra, then the industry would be a success. . .

CPP to bet on NZ dairy?–  Offsetting Behaviour:

This, I like.

Recall that Canada runs a ridiculous dairy cartel. When I teased the Dairy Farmers of Canada about the high price of baby formula in Canada, they said I wasn’t playing fair as Canada doesn’t even produce baby formula; it’s all imported. Meanwhile, Chinese companies are set to invest a few hundred million adding to New Zealand’s already extensive capacity in that area.

But Canada has the world’s best dairy system, if you ask the guys running the cartel.

What happens if you ask the Canadian Pension Plan Investment Board?
Mark Wiseman, chief executive of the $A170 billion fund, will visit Australia this month amid the group’s expanding portfolio of interests across the Tasman. …

Canadians look south to invest in agriculture:

Canadian investment funds have big plans to become involved in Australian land, ports and other infrastructure projects, driven by food export potential.

The Canadian Pension Plan Investment Board has set up a team to examine opportunities.

Mark Wiseman, chief executive of the $A170 billion fund, will visit Australia this month amid the group’s expanding portfolio of interests across the Tasman.

Canada’s pension system has total funds of $A1 trillion. Other funds have also shown an interest in Australia.

Investors are being forced to search for higher returns outside the old northern hemisphere markets.

Mr Wiseman says he anticipates low growth in Europe and the US for years. He believes agriculture offers huge potential.

“Australia is one of the jurisdictions [where] we’re looking at the agricultural industry broadly, right from land on up through the infrastructure to support it, including things like ports,” he says in the UBS Global Leaders Insights Series on Sky News Business. . .

DairyNZ Farmers’ Forum takes science to the regions:

DairyNZ’s latest research will be showcased at a nationwide series of Farmers’ Forum events during April and May.

The informative and practical seminars will be held in Whangarei, Hawera, Woodville, Invercargill and Greymouth.

DairyNZ chief executive, Dr Tim Mackle, says each year the Farmers’ Forum provides a great opportunity for dairy farmers to see how their levy is invested and to learn about dairy industry research and development work relevant to their region’s farming issues.

“Our Farmers’ Forum has become an annual gathering and every second year we go out to the regions and customise forum topics based on locally relevant issues,” says Tim. . .

New Zealand Employers Commends Solomon Islands Seasonal Workers:

Solomon Islands Minister for Foreign Affairs and External Trade, Hon Clay Forau was pleased to hear positive feed backs and comments from various Employers in New Zealand on the work output and performances of Solomon Islands nationals employed under the Recognized Seasonal Employers Scheme.

‘I am pleased as well as the Government to hear that our workers are doing well in New Zealand’, says Minister Forau. Our workers are settling in well and are adjusting to the New Zealand culture and environment.

On Monday, the Hon Minister and his delegation were in Nelson on New Zealand’s South Island, where they met with two of the employers and both have commended highly Solomon Islands seasonal workers. . .

A2 Corporation added to NZX 50 Index:

A2 Corporation Limited (“A2C” or the “Company”) is pleased to announce that the Company will be added to the NZX 50 Index, effective at market open on Monday 18th March 2013.

The Company moved from the NZAX to the NZX Main Board on 7th December 2012, following the successful completion of the December equity raising.

A2C’s Managing Director Geoffrey Babidge said “inclusion in the NZX 50 Index is an important milestone in the Company’s development and over time should help continue to broaden the shareholder base and increase overall investor awareness of A2C. “ . . .


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