Yovich & Co. Weekly Update - 20 January 2014
Jan 20, 2014 | Commentary
January 20th 2014
This Week’s Themes
The New Zealand market has made another cracking start to the year with investors returning from holiday excited by the upbeat outlook for the local economy.
Weak inflation figures released this week are suggesting that Interest Rate rises may be further delayed.
Across the Tasman, the year has had a muted start as the slow resource sector continues to weigh on the economy.
The Dow Jones has also had a slow start as markets in the U.S. remain wary of the impact that slowing Quantitative Easing will have on equities. However, the Tech sector is surging to decade highs.
The New Zealand Dollar is marching towards parity against the Aussie. I am not overly convinced that we will get there but if we do, there will be some banter with my Aussie mates.
The New Zealand Energy Sector – Who Will Win the Election?
Last year will be remembered for the listing of the Energy companies and the Political gamesmanship between both sides of Parliament. Labour has reiterated that regulation of the Energy Sector is going to be a key Election issue for them, and as a result the market is pricing in this risk. Below is a summary based on FNZC research, of the impact that this policy could have on the value of the energy companies. What is clear to me is that the market is assigning an overly pessimistic view of the impact that this regulation will have on the Energy companies and a high probability of Labour wining the Election, while the actual probability in my mind is closer to 50:50. Given this, we believe that it is worthwhile having Energy Sector exposure in a portfolio.
*Meridian prices are based on the fully paid price after the second instalment of 50 cents.
As you can see, there is far more upside than there is downside and if you believe that National has a good chance of wining the next Election, the probabilities are in your favour to make some good gains.
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Shona Keoghan | Jan 21, 2014
Hi Jarrod, I have a sum of money to invest, maybe not shares, what can you suggest? Regards, Shona 021 286 1122