June 12, 2024 • 18 mins
The global economy is still recovering from a difficult few years, and New Zealand is not immune.
The NZX 50 has been struggling recently, the recent mini-reporting season saw largely disappointing results for many companies, and the usual investment opportunities are not delivering.
In these times of difficulty though, there are plenty of opportunities for new industries to invest in, and different countries for New Zealand to look at for trade.
NZME Business editorial director, Fran O’Sullivan, is covering all these ups and downs in her latest Capital Markets and Investment special, and she joins us now on The Front Page to discuss the state of the market.
Follow The Front Page on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.
You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.
Host: Chelsea Daniels
Sound Engineer: Paddy Fox
Producer: Ethan Sills
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Elder.
Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast.
Speaker 3 (00:10):
Presented by the New Zealand Herald.
Speaker 2 (00:17):
The global economy is still recovering from a difficult few years,
and New Zealand is not immune. The ENZX fifty has
been struggling recently. The recent mini reporting season saw largely
disappointing results for many companies and the usual investment opportunities
are not delivering in these times of difficulty, though, there
(00:39):
are plenty of opportunities for new industries to invest in
and different countries for.
Speaker 3 (00:43):
New Zealand to look at for trade enzed Me.
Speaker 2 (00:47):
Business Editorial Director fran O'Sullivan is covering all these ups
and downs in her latest Capital Markets and Investments special.
She joins us now on the Front Page to discuss
the state of the market. Frand, we all know the
global economy is in a bit of a rough spot
at the moment. What impact is that having on the
(01:08):
capital markets and the investment industry.
Speaker 4 (01:12):
Well, I think what we're seeing is, you know, the
investment industry is in an interesting, i would say inflection point.
There's a very excellent article in the Report by Jamie
Gray which looks at what's happening, for instance, with direct
share markets versus money that just goes through private equity
or directly into companies. You've seen quite a shift from that.
(01:36):
People are in two minds about having exposure of their
business to share markets and quarterly reporting that type of thing,
particularly in the United States, and so we've seen quite
a shift there. The number of publicly listed firms has declined.
It's been quite similar in New Zealand, except on the
converse side doing a capital raise, you know, like for
(01:56):
instance we saw with Auckland Airport when they needed to
raise funds at the time of the pandemic. That was
done very quickly, and in that respect, a public market
can act quite fast. So it's an interesting time. And
against that also you have the rise of fixed interest
The current environment means you're getting much more coin for
(02:17):
money in the bank or in fixed interest type securities,
and so it's shifting around a lot. Until the interest
rates declined significantly, I think it will be harder to
get markets roaring again.
Speaker 2 (02:33):
When we talk about capital markets, is that kind of
where people are putting their investments, their money.
Speaker 4 (02:38):
Well, in capital markets, it's a very broad term. I
mean you're also looking as I said, it's the plethora
from money in the bank, it's key we savor, it's
fixed interest, it's all sorts of avenues through the likes
of particular companies that just aggregate, look after smaller investors,
and there's directly in the share markets. So it's a
(03:01):
very broad canvas. You know. If we're looking at New Zealand,
we do need a lot of capital and the government
has been emphasizing this repetitively that it wants private capital
to come into for instance, helping to fund our infrastructure
demand over the next little while, and that is quite massive.
(03:21):
New Zealand has been posting an infrastructure deficit for a
good fifteen years now and it doesn't get any smaller.
In fact, you know, the impact of inflation, supply chain changes,
all of that has meant that the cost of replacing
infrastructure and building new infrastructure has escalated and we saw
that for instance when the prior government was trying to
(03:44):
do the light rail project and that expanded in the
cost structure. We saw it more recently with Kiwi Rail
and the Cook Straight ferries. So there's a big demand
for funds there. One of the things which is quite
interesting at this present time is whether we will access
Kei we Saver for instance, and the Stock Exchange the
(04:04):
nz X has pointed to, you know, their massive amount
of funds that have already been aggregated in Kei we
Saver in New Zealand and suggestions that if we just
had the same amount pro rata as with Australia with
their funds coming into infrastructure, that would go a long way.
So this tension between bringing in foreign investment but also
(04:26):
making sure that New Zealand investors via their Kei Wei
Saver accounts, also have a slice of the action.
Speaker 3 (04:34):
Well, I was going to say, is the point of
difference with Australia.
Speaker 2 (04:37):
Hey, the super fund is enormous and they use it
in quite different ways to us.
Speaker 5 (04:43):
You know, people look at Australia and saying it's doing
much better. Well, the financial sector is always in better
shape because they have compulsory super and much more savings
to balance out the debt they have. So Australia's economy
is usually looking more robust than ours.
Speaker 3 (04:57):
Are there any lessons to be learned there?
Speaker 4 (04:59):
Well, the big lesson was we were too slow off
the mark and so we're looking at you know, the
private savings funds that have been masked in Australia through
their compulsory superannuation schemes compared to here, where you can
still on an opt out basis. Australia, it's a much
higher percentage than here. It has operated probably for twenty
(05:20):
years ahead of New Zealand. We passed by the opportunity
to do this back in the seventies and eighties when
we should have, and you know, we re late to
the party. The late Sir Michael Cullen essentially got key
we Saver up and running and good on them, but
we were very slow and it has hindered the economy.
It's hindered the amount of private savings available to people
(05:42):
when they retire or to put against building hard assets
like housing and homes for themselves along the way. But
also we haven't got that private funds coming into the
New Zealand market in the degree that we should. Much
of it has invested offshore considerable here. But you know,
if I think back to earlier on in the century
(06:04):
when we actually had quite an avalanche of funds coming
out of Australia to buy up some of our major
companies here, and it was funded to a large degree
by their savings funds. So you know this is important
for capital formation and for growth of our country.
Speaker 3 (06:20):
Should we make it compulsory to contribute to key we saver?
Speaker 1 (06:24):
Oh?
Speaker 4 (06:24):
Yes, absolutely, and it's quite barking that we haven't done so.
I mean, this should have been done years ago. You know,
this is one area of lass A fair that really
in the best interests of the entire population should have
been dealt with earlier, because, of course, if you do
have substantial private savings, it does lessen the demand on
the government and the public funds at a later stage
(06:46):
to look after people who haven't looked after themselves on
their retirement.
Speaker 2 (06:50):
Mark Peterson begs the question how are we going to
pay for that?
Speaker 3 (06:54):
Which I think is a good one. He's right, isn't it?
Speaker 2 (06:56):
For instance, we have a nationwide infrastructure deficit asb he
estimates the editor over a trillion dollars. Is it surely
time for New Zealand to look at something like public
private partnerships.
Speaker 4 (07:08):
Yeah, and we have done that in the past, and
there have been considerable public private partnerships. I think one
of the things to be aware of though, that somebody
at the end of the day still has to pay
the piper, so you know, it isn't cost free in
the sense that typically it might end up either being
funded ultimately by taxation or funded by our user pays.
(07:31):
And we will see a move to that more in
toll roads, that type of thing, congestion charging. As you know,
the government seeks to allow private operators to make a
return on their investments, so you know, you can't neglect
that side of it. I think one of the things
he has done behind scenes, and Andrew Bailey, the Commerce Minister,
(07:53):
went a little way towards talking about it, but it's
still very in the development phase is looking at how
we make good on the Capital Markets Report, which was
done back in twenty nineteen and looked at a range
of things about allocating capital and there were lots of
ideas and recommendations there and not all of those have
(08:14):
been met by a long way. But one of the
issues which is worth exploring in my view, is allowing
gen taylors like Mercury, Meridian and Genesis to raise capital
themselves without the Crown participating. Crown has forty nine percent
of those assets which were partially privatized under the mixed
(08:36):
ownership assets program several years ago, back in twenty fourteen.
They have grown in value since that time, which is
an indication of the discipline of share markets on them
and having to publicly report. But what is interesting is
they are going to need more capital to expand and
we have a brilliant opportunity right now with you know,
(08:59):
is what has been rather euphemistically talked about New Zealand
being a green battery for the world, in other words,
producing renewable energy to source power for data centers, for
hydrogen development and a range of other new areas. But
you need capital to do that. And if the crown
is sitting there saying, hello, we don't really want to
(09:21):
contribute to this, well you can't stop the companies, in
my view, from going ahead.
Speaker 2 (09:37):
What are people investing in at the moment? Are there
any growth areas or areas of opportunities here?
Speaker 4 (09:42):
Well, I think you know the areas of opportunity. You know,
things are shifting around a bit obviously at the moment,
and partially that's due to the state of the markets
and where we're at. But the long bet has to
be on areas like green technologies, has to be space
some big bets out there that the government is looking
(10:03):
at in New Zealand, trade and enterprise and others. And
you know, I'm not in the business of giving investment advice,
but I would say read the report.
Speaker 2 (10:11):
There is huge interest in renewable energy from overseas. I
remember we spoke to Minister Judith Collins on the podcast
and she said that that's all they wanted to talk
to her about in Colorado, as well as her space
portfolio of course, so there seems to be a lot
of opportunity in that sector. Do you see this government
being more open to privatizing some of those investments.
Speaker 4 (10:31):
Well, I think they're more open to harnessing private capital
to come into New Zealand. And if you look at
the trip that Chster Piluxen will take to Tokyo next week,
apart from the space focus which will be significant, there
will also be focus on renewable energy and investments in that.
Japan has significant resource investments in New Zealand. And you know,
(10:54):
some of these companies have quite recently stepped up in
hydrogen and elsewhere, and that has been something which the
government looked at really going back a decade or so ago,
and it all got punctuated by COVID for a few years.
But in essence, we do have sizeable assets that need investment.
(11:14):
And the history of the Japanese investment has been good
in this country. They solid investors, that patient, they play
by the rules. So I would anticipate that over time
we will see more investment coming in from Japan in
this particular area. But it won't just be Japan. You know,
the United States is a major investor and a major
(11:36):
investor in green technology. And just last week up in
Singapore at the Indo Pacific Economic Framework Meeting, they did
actually have a beauty parade of smaller companies from the
Asia Pacific and Indo Pacific and they launched an Indo
Pacific Climate one hundred and we actually had eight New
(11:58):
Zealand companies that were part of that, and this was
the Tech one hundred which was unveiled there. They're all
quite small, but they're actually on the map now and
you would imagine the type of international funds that were there,
like black Rock and others. This has given them a
huge push up. So over time some of those companies
may well develop into significant New Zealand companies. The government's
(12:20):
doing a lot of that, and I haven't seen the
full list of who's going up with the Prime Minister
next week to Tokyo, but we can expect to see
some more companies in that renewables area, and of course
Morrison Paul Newfield is there. They've got a sizeable international
portfolio apart from here their obvious interest in managing infratil,
(12:44):
but they have a sizeable renewables portfolio and we'll see
more of that.
Speaker 2 (12:49):
Speaking of the Prime Minister's travels, we last spoke to
you on the front page when Luxon visited Southeast Asia.
He's now of course heading to Japan next week.
Speaker 1 (13:00):
This week we're welcoming Premier League one to New Zealand,
the highest level visit by Chinese leaders of twenty seventeen,
and later this week we're off the Japan to keep
building on our relationship there too.
Speaker 6 (13:10):
So that's the formula. More trade with other countries means
a stronger economy here at home. We're a small country
at the bottom of the world, and we've really got
to push really, really hard so that we can deliver
stronger trade links overseas to make Kiwi's better off here
at home.
Speaker 2 (13:27):
How important are these business relationships to growing our economy.
Speaker 4 (13:31):
Well, they're very important because we really have come off
the radar. I mean I've sort of covered this on
and off for many years and are a call writing
for euro Money after the nineteen nineties recession about how
the hunt for equity was a big thing for New Zealand.
We just couldn't get the capitol we needed for some
of our major companies who had been absolutely smashed by
(13:54):
the nineteen ninety share market crash and took ages to
get going again. So what happened was significant equity states
were brought up internationally and came into New Zealand. We
saw that again with companies that were vulnerable after the
GFC in two thousand and eight two thousand and nine,
and we had three significant Chinese investments made at that time.
(14:15):
I think this is absolutely critical. Again, we are competing
internationally because you know, everybody is out there waving the flag,
and if we're not there, if we're not in the market,
and if we're not pushing our brand forward saying the
opportunities we have. The government positioning itself is not only
(14:35):
open for business, but actively fostering it. That is super important.
I think one of the important things which has been
pretty much overlooked is a shift that the government made
last week and INNY since David Sema, the Associate Finance Minister,
wrote to the Overseas Investment Commission and said he wanted
to shorten the time by half for getting approvals for
(14:58):
investments foreign investment in New Zealand and stripping out a
lot of regulation. People have comment on this and we've
had one of the lowest active investment foreign direct investment
rates in the OECD.
Speaker 2 (15:12):
And China is still one of our biggest trading partners.
That we've actually got Chinese Premier Li Jiang visiting this week,
the first such visit in seven years. How important is
this visit and is there any concern from China at
us looking elsewhere?
Speaker 4 (15:26):
Oh? Look, China is looking elsewhere itself. I mean if
you go somewhere like Guangzhou and to the Guangdong Province,
which has been a massive manufacturing motor for China and
the world for some twenty years now, a number of
those companies have also set up operations and places like
Vietnam and elsewhere in Southeast Asia because it's a growth
(15:48):
area and also they can get cheaper labor. You know,
this is fundamentally a factor. There are growing populations in
Vietnam and Indonesia, Philippines and these are younger population and
over time they you know, will have a terrific growth
story to tell. So it is important that we're part
of that. You know, the government is positioning it is
(16:09):
China and rather than diversification away from China, and the
statements out of ministers, particularly Todd McLay, the Trade Minister
this week, have really been about wanting to continue to
grow with China but also to grow with other developing
markets in the Pacific RIM.
Speaker 2 (16:28):
And looking ahead, Fran, when do the people you've spoken
to expect things to turn around, say like the in
ZX fifty, which has been quite lackluster. Is there any
particular moment or event people are kind of waiting for?
Speaker 4 (16:40):
Oh, look, I think you know things are cyclical and
you know there is a rhythm. We've been through these
cycles before. Ultimately it depends on optimism. But you know,
animal spirits is I think they refer to it. And
in the investing arena, do return to markets? I think
once we get out of the low grape cycle and
(17:01):
you know, the returns on fixed assets and fixed interests
and all of that move and people can see the
logic of moving into a way from just parking money
in a bank or somewhere else for the time being,
that actually to get back into markets that will turn.
I wouldn't say exactly when there's a number of factors there,
(17:21):
thinking domestically but also looking internationally. There's also a range
of geostrategic factors. You know, China and the United States
stash what's happening in the US If, for instance, we
get a change of president there at the end of
the year, will that mean our exporters face significant tariffs
(17:43):
going into the United States. What's happening with all the
other elections around the way? Will Modi continue to operate
a pro business agenda to the extent he has in
India now that he's had his wings clipped, And then
of course we've got major issues the French election, the
UK elect I mean, it is the year of the
vote this year, so there's significant disruption and volatility out there,
(18:06):
but it's also a good time to take money if
you're into risk.
Speaker 2 (18:09):
Thanks for joining us FRAN and you can find the
Capital Markets Magazine in today's issue of the New Zealand
Herald or online. That said, for this episode of the
Front Page. You can read more about today's stories and
extensive news coverage at enzet Herald dot co dot z.
(18:29):
The Front Page is produced by Ethan Siles with sound
engineer Patty Fox.
Speaker 3 (18:34):
I'm Chelsea Daniels.
Speaker 2 (18:36):
Subscribe to the Front Page on iHeartRadio or wherever you
get your podcasts, and tune in tomorrow for another look
behind the headlines.
Elder.
Speaker 2 (00:06):
I'm Chelsea Daniels and this is the Front Page, a
daily podcast.
Speaker 3 (00:10):
Presented by the New Zealand Herald.
Speaker 2 (00:17):
The global economy is still recovering from a difficult few years,
and New Zealand is not immune. The ENZX fifty has
been struggling recently. The recent mini reporting season saw largely
disappointing results for many companies and the usual investment opportunities
are not delivering in these times of difficulty, though, there
(00:39):
are plenty of opportunities for new industries to invest in
and different countries for.
Speaker 3 (00:43):
New Zealand to look at for trade enzed Me.
Speaker 2 (00:47):
Business Editorial Director fran O'Sullivan is covering all these ups
and downs in her latest Capital Markets and Investments special.
She joins us now on the Front Page to discuss
the state of the market. Frand, we all know the
global economy is in a bit of a rough spot
at the moment. What impact is that having on the
(01:08):
capital markets and the investment industry.
Speaker 4 (01:12):
Well, I think what we're seeing is, you know, the
investment industry is in an interesting, i would say inflection point.
There's a very excellent article in the Report by Jamie
Gray which looks at what's happening, for instance, with direct
share markets versus money that just goes through private equity
or directly into companies. You've seen quite a shift from that.
(01:36):
People are in two minds about having exposure of their
business to share markets and quarterly reporting that type of thing,
particularly in the United States, and so we've seen quite
a shift there. The number of publicly listed firms has declined.
It's been quite similar in New Zealand, except on the
converse side doing a capital raise, you know, like for
(01:56):
instance we saw with Auckland Airport when they needed to
raise funds at the time of the pandemic. That was
done very quickly, and in that respect, a public market
can act quite fast. So it's an interesting time. And
against that also you have the rise of fixed interest
The current environment means you're getting much more coin for
(02:17):
money in the bank or in fixed interest type securities,
and so it's shifting around a lot. Until the interest
rates declined significantly, I think it will be harder to
get markets roaring again.
Speaker 2 (02:33):
When we talk about capital markets, is that kind of
where people are putting their investments, their money.
Speaker 4 (02:38):
Well, in capital markets, it's a very broad term. I
mean you're also looking as I said, it's the plethora
from money in the bank, it's key we savor, it's
fixed interest, it's all sorts of avenues through the likes
of particular companies that just aggregate, look after smaller investors,
and there's directly in the share markets. So it's a
(03:01):
very broad canvas. You know. If we're looking at New Zealand,
we do need a lot of capital and the government
has been emphasizing this repetitively that it wants private capital
to come into for instance, helping to fund our infrastructure
demand over the next little while, and that is quite massive.
(03:21):
New Zealand has been posting an infrastructure deficit for a
good fifteen years now and it doesn't get any smaller.
In fact, you know, the impact of inflation, supply chain changes,
all of that has meant that the cost of replacing
infrastructure and building new infrastructure has escalated and we saw
that for instance when the prior government was trying to
(03:44):
do the light rail project and that expanded in the
cost structure. We saw it more recently with Kiwi Rail
and the Cook Straight ferries. So there's a big demand
for funds there. One of the things which is quite
interesting at this present time is whether we will access
Kei we Saver for instance, and the Stock Exchange the
(04:04):
nz X has pointed to, you know, their massive amount
of funds that have already been aggregated in Kei we
Saver in New Zealand and suggestions that if we just
had the same amount pro rata as with Australia with
their funds coming into infrastructure, that would go a long way.
So this tension between bringing in foreign investment but also
(04:26):
making sure that New Zealand investors via their Kei Wei
Saver accounts, also have a slice of the action.
Speaker 3 (04:34):
Well, I was going to say, is the point of
difference with Australia.
Speaker 2 (04:37):
Hey, the super fund is enormous and they use it
in quite different ways to us.
Speaker 5 (04:43):
You know, people look at Australia and saying it's doing
much better. Well, the financial sector is always in better
shape because they have compulsory super and much more savings
to balance out the debt they have. So Australia's economy
is usually looking more robust than ours.
Speaker 3 (04:57):
Are there any lessons to be learned there?
Speaker 4 (04:59):
Well, the big lesson was we were too slow off
the mark and so we're looking at you know, the
private savings funds that have been masked in Australia through
their compulsory superannuation schemes compared to here, where you can
still on an opt out basis. Australia, it's a much
higher percentage than here. It has operated probably for twenty
(05:20):
years ahead of New Zealand. We passed by the opportunity
to do this back in the seventies and eighties when
we should have, and you know, we re late to
the party. The late Sir Michael Cullen essentially got key
we Saver up and running and good on them, but
we were very slow and it has hindered the economy.
It's hindered the amount of private savings available to people
(05:42):
when they retire or to put against building hard assets
like housing and homes for themselves along the way. But
also we haven't got that private funds coming into the
New Zealand market in the degree that we should. Much
of it has invested offshore considerable here. But you know,
if I think back to earlier on in the century
(06:04):
when we actually had quite an avalanche of funds coming
out of Australia to buy up some of our major
companies here, and it was funded to a large degree
by their savings funds. So you know this is important
for capital formation and for growth of our country.
Speaker 3 (06:20):
Should we make it compulsory to contribute to key we saver?
Speaker 1 (06:24):
Oh?
Speaker 4 (06:24):
Yes, absolutely, and it's quite barking that we haven't done so.
I mean, this should have been done years ago. You know,
this is one area of lass A fair that really
in the best interests of the entire population should have
been dealt with earlier, because, of course, if you do
have substantial private savings, it does lessen the demand on
the government and the public funds at a later stage
(06:46):
to look after people who haven't looked after themselves on
their retirement.
Speaker 2 (06:50):
Mark Peterson begs the question how are we going to
pay for that?
Speaker 3 (06:54):
Which I think is a good one. He's right, isn't it?
Speaker 2 (06:56):
For instance, we have a nationwide infrastructure deficit asb he
estimates the editor over a trillion dollars. Is it surely
time for New Zealand to look at something like public
private partnerships.
Speaker 4 (07:08):
Yeah, and we have done that in the past, and
there have been considerable public private partnerships. I think one
of the things to be aware of though, that somebody
at the end of the day still has to pay
the piper, so you know, it isn't cost free in
the sense that typically it might end up either being
funded ultimately by taxation or funded by our user pays.
(07:31):
And we will see a move to that more in
toll roads, that type of thing, congestion charging. As you know,
the government seeks to allow private operators to make a
return on their investments, so you know, you can't neglect
that side of it. I think one of the things
he has done behind scenes, and Andrew Bailey, the Commerce Minister,
(07:53):
went a little way towards talking about it, but it's
still very in the development phase is looking at how
we make good on the Capital Markets Report, which was
done back in twenty nineteen and looked at a range
of things about allocating capital and there were lots of
ideas and recommendations there and not all of those have
(08:14):
been met by a long way. But one of the
issues which is worth exploring in my view, is allowing
gen taylors like Mercury, Meridian and Genesis to raise capital
themselves without the Crown participating. Crown has forty nine percent
of those assets which were partially privatized under the mixed
(08:36):
ownership assets program several years ago, back in twenty fourteen.
They have grown in value since that time, which is
an indication of the discipline of share markets on them
and having to publicly report. But what is interesting is
they are going to need more capital to expand and
we have a brilliant opportunity right now with you know,
(08:59):
is what has been rather euphemistically talked about New Zealand
being a green battery for the world, in other words,
producing renewable energy to source power for data centers, for
hydrogen development and a range of other new areas. But
you need capital to do that. And if the crown
is sitting there saying, hello, we don't really want to
(09:21):
contribute to this, well you can't stop the companies, in
my view, from going ahead.
Speaker 2 (09:37):
What are people investing in at the moment? Are there
any growth areas or areas of opportunities here?
Speaker 4 (09:42):
Well, I think you know the areas of opportunity. You know,
things are shifting around a bit obviously at the moment,
and partially that's due to the state of the markets
and where we're at. But the long bet has to
be on areas like green technologies, has to be space
some big bets out there that the government is looking
(10:03):
at in New Zealand, trade and enterprise and others. And
you know, I'm not in the business of giving investment advice,
but I would say read the report.
Speaker 2 (10:11):
There is huge interest in renewable energy from overseas. I
remember we spoke to Minister Judith Collins on the podcast
and she said that that's all they wanted to talk
to her about in Colorado, as well as her space
portfolio of course, so there seems to be a lot
of opportunity in that sector. Do you see this government
being more open to privatizing some of those investments.
Speaker 4 (10:31):
Well, I think they're more open to harnessing private capital
to come into New Zealand. And if you look at
the trip that Chster Piluxen will take to Tokyo next week,
apart from the space focus which will be significant, there
will also be focus on renewable energy and investments in that.
Japan has significant resource investments in New Zealand. And you know,
(10:54):
some of these companies have quite recently stepped up in
hydrogen and elsewhere, and that has been something which the
government looked at really going back a decade or so ago,
and it all got punctuated by COVID for a few years.
But in essence, we do have sizeable assets that need investment.
(11:14):
And the history of the Japanese investment has been good
in this country. They solid investors, that patient, they play
by the rules. So I would anticipate that over time
we will see more investment coming in from Japan in
this particular area. But it won't just be Japan. You know,
the United States is a major investor and a major
(11:36):
investor in green technology. And just last week up in
Singapore at the Indo Pacific Economic Framework Meeting, they did
actually have a beauty parade of smaller companies from the
Asia Pacific and Indo Pacific and they launched an Indo
Pacific Climate one hundred and we actually had eight New
(11:58):
Zealand companies that were part of that, and this was
the Tech one hundred which was unveiled there. They're all
quite small, but they're actually on the map now and
you would imagine the type of international funds that were there,
like black Rock and others. This has given them a
huge push up. So over time some of those companies
may well develop into significant New Zealand companies. The government's
(12:20):
doing a lot of that, and I haven't seen the
full list of who's going up with the Prime Minister
next week to Tokyo, but we can expect to see
some more companies in that renewables area, and of course
Morrison Paul Newfield is there. They've got a sizeable international
portfolio apart from here their obvious interest in managing infratil,
(12:44):
but they have a sizeable renewables portfolio and we'll see
more of that.
Speaker 2 (12:49):
Speaking of the Prime Minister's travels, we last spoke to
you on the front page when Luxon visited Southeast Asia.
He's now of course heading to Japan next week.
Speaker 1 (13:00):
This week we're welcoming Premier League one to New Zealand,
the highest level visit by Chinese leaders of twenty seventeen,
and later this week we're off the Japan to keep
building on our relationship there too.
Speaker 6 (13:10):
So that's the formula. More trade with other countries means
a stronger economy here at home. We're a small country
at the bottom of the world, and we've really got
to push really, really hard so that we can deliver
stronger trade links overseas to make Kiwi's better off here
at home.
Speaker 2 (13:27):
How important are these business relationships to growing our economy.
Speaker 4 (13:31):
Well, they're very important because we really have come off
the radar. I mean I've sort of covered this on
and off for many years and are a call writing
for euro Money after the nineteen nineties recession about how
the hunt for equity was a big thing for New Zealand.
We just couldn't get the capitol we needed for some
of our major companies who had been absolutely smashed by
(13:54):
the nineteen ninety share market crash and took ages to
get going again. So what happened was significant equity states
were brought up internationally and came into New Zealand. We
saw that again with companies that were vulnerable after the
GFC in two thousand and eight two thousand and nine,
and we had three significant Chinese investments made at that time.
(14:15):
I think this is absolutely critical. Again, we are competing
internationally because you know, everybody is out there waving the flag,
and if we're not there, if we're not in the market,
and if we're not pushing our brand forward saying the
opportunities we have. The government positioning itself is not only
(14:35):
open for business, but actively fostering it. That is super important.
I think one of the important things which has been
pretty much overlooked is a shift that the government made
last week and INNY since David Sema, the Associate Finance Minister,
wrote to the Overseas Investment Commission and said he wanted
to shorten the time by half for getting approvals for
(14:58):
investments foreign investment in New Zealand and stripping out a
lot of regulation. People have comment on this and we've
had one of the lowest active investment foreign direct investment
rates in the OECD.
Speaker 2 (15:12):
And China is still one of our biggest trading partners.
That we've actually got Chinese Premier Li Jiang visiting this week,
the first such visit in seven years. How important is
this visit and is there any concern from China at
us looking elsewhere?
Speaker 4 (15:26):
Oh? Look, China is looking elsewhere itself. I mean if
you go somewhere like Guangzhou and to the Guangdong Province,
which has been a massive manufacturing motor for China and
the world for some twenty years now, a number of
those companies have also set up operations and places like
Vietnam and elsewhere in Southeast Asia because it's a growth
(15:48):
area and also they can get cheaper labor. You know,
this is fundamentally a factor. There are growing populations in
Vietnam and Indonesia, Philippines and these are younger population and
over time they you know, will have a terrific growth
story to tell. So it is important that we're part
of that. You know, the government is positioning it is
(16:09):
China and rather than diversification away from China, and the
statements out of ministers, particularly Todd McLay, the Trade Minister
this week, have really been about wanting to continue to
grow with China but also to grow with other developing
markets in the Pacific RIM.
Speaker 2 (16:28):
And looking ahead, Fran, when do the people you've spoken
to expect things to turn around, say like the in
ZX fifty, which has been quite lackluster. Is there any
particular moment or event people are kind of waiting for?
Speaker 4 (16:40):
Oh, look, I think you know things are cyclical and
you know there is a rhythm. We've been through these
cycles before. Ultimately it depends on optimism. But you know,
animal spirits is I think they refer to it. And
in the investing arena, do return to markets? I think
once we get out of the low grape cycle and
(17:01):
you know, the returns on fixed assets and fixed interests
and all of that move and people can see the
logic of moving into a way from just parking money
in a bank or somewhere else for the time being,
that actually to get back into markets that will turn.
I wouldn't say exactly when there's a number of factors there,
(17:21):
thinking domestically but also looking internationally. There's also a range
of geostrategic factors. You know, China and the United States
stash what's happening in the US If, for instance, we
get a change of president there at the end of
the year, will that mean our exporters face significant tariffs
(17:43):
going into the United States. What's happening with all the
other elections around the way? Will Modi continue to operate
a pro business agenda to the extent he has in
India now that he's had his wings clipped, And then
of course we've got major issues the French election, the
UK elect I mean, it is the year of the
vote this year, so there's significant disruption and volatility out there,
(18:06):
but it's also a good time to take money if
you're into risk.
Speaker 2 (18:09):
Thanks for joining us FRAN and you can find the
Capital Markets Magazine in today's issue of the New Zealand
Herald or online. That said, for this episode of the
Front Page. You can read more about today's stories and
extensive news coverage at enzet Herald dot co dot z.
(18:29):
The Front Page is produced by Ethan Siles with sound
engineer Patty Fox.
Speaker 3 (18:34):
I'm Chelsea Daniels.
Speaker 2 (18:36):
Subscribe to the Front Page on iHeartRadio or wherever you
get your podcasts, and tune in tomorrow for another look
behind the headlines.
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