Sam Trethewey: Milford Asset Management Portfolio Manager on the market reactions to the latest OCR cut

The Reserve Bank ended the year on a hopeful note and brought down the OCR for the end of 2025.

The central bank cut the Official Cash Rate another 25 basis points today - bringing it to 2.25 percent.

Milford Asset Management's Sam Trethewey explained further.

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Episode Transcript

Speaker 1 (00:09):
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Speaker 2 (00:16):
Sam Tratha Wey Milford Acid Management.

Speaker 3 (00:18):
Hi Sam, good evening, he.

Speaker 2 (00:20):
So, what did you make of that for sher and
PIKEL result?

Speaker 3 (00:24):
Well, Ook, it was a big day from the market
because Frishi and Bikel is the largest listed company and
naturally has a big overall influence on performance of the inxidex.
So the result the company delivered was what the market
calls a beaten rays. So profit growth for the period
came and ahead of guidance provided in August, and they
also upgraded or raised guidance for the year ahead. So

(00:44):
the company's core product, which is respiratory masks that are
used in intensive care units and elsewhere in hospitals across
the globe, grew at seventeen percent a year on year,
So that's a continuation of pre strong growth that they
have been seeing there for every long time. And the
company also demonstrated some good cost control, benefiting a bit
from the weekning New Zealand dollar to deliver overall profit

(01:05):
growth of and pretty impressive thirty nine percent. So despite
the headwinds from Trump's tariffs. They managed to pull off
a big number there, so it's impressive company, world class
technology and stands out when we look across the globe.

Speaker 2 (01:17):
Yeah, well, what impact does the tariffs having on them?
How are they managing that?

Speaker 3 (01:21):
Yes, that's certainly been, I guess an area of concern
for investors over this year, with the US essentially being
Fresh and Pipers the largest customer, and the company is
getting head on tariffs from product source Tire and Yu
zeal On soldo into the US and about a third
of their production as based here locally. So over the
past couple of months, the team at Fresh and bikel
have found a range of essentially manufacturing efficiency improvements to

(01:46):
offset the cost of the tariffs. That's literally, in the words
and the CEO, thousands of small changes across what is
a very large production line to offset that impact on
their cost base. And that's a positive compared to the alternative,
say simply putting up prices and pushing it through to hospital.
So there's more impact to come from taffs, but they
backed themselves to continue to do that to offset the

(02:08):
lost had the headline.

Speaker 2 (02:09):
Hey, what was the impact that you saw on the
market today from the ocr cup.

Speaker 3 (02:14):
Yeah, that was the other big event. So I think
the surprise across the market was clearly the optimism that
it was expressed by the RBNZ that the easing cycle
is now largely done and the economic recovery is underway,
so reflected in what they provided in their forward track
of where and straits are heading, that was above market expectations.

(02:34):
So we did see the ki dollar jump higher I
got across against key crosses on the back of that.
But look going forward, I think there's two clear areas
that will be interesting. So firstly, mortgage activity, given the
message today as a catalyst for those with mortgages to
rethink how far out they are fixed, and it was
pretty hot topic of conversation in the press conference this afternoon.

(02:56):
You could argue as well that the lack of refixing
by mortgage holders onto those lower fixed term rates rather
than floating, has been a key reason that we haven't
seen the economic activity of economic impact of rate cuts
flow through to activity so far. And then secondly, it's
really around term deposits, so that three percent level where
they're just sitting above at the moment, has been historically

(03:18):
at sort of a level where MANI holders up to
pend term deposits go hey, look I can do better
than that. Three percent less tax is not worth it.
They start to look for higher attends elsewhere, turns to
things like guest dividend paying stocks on the sheer market,
property companies, et cetera. That trend has been underway on
the ns X in recent months and those companies has
been strong performers. But they are the two clear things

(03:39):
that do come out of this announcement that could flow
through in the coming months.

Speaker 2 (03:42):
Sam always good to talk to you mate. Thank you, Sam.
Tra through we have MILF Fedescid Management.

Speaker 1 (03:46):
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