Katlyn Parker: Milford Asset Management analyst on the market response to the OCR cut

Several Kiwi businesses have expressed relief as the Reserve Bank announces cuts to the OCR.

The cash rate has been dropped 25 basis points to 5.25 percent - the first significant cut to the OCR since 2020. 

Milford Asset Management's Katlyn Parker unpacks the wider market response.

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Episode Transcript

Speaker 1 (00:00):
Now Kaitland Packet Milfedesset Management is with us A Kitlin him,
I'm very well, thank you. Have the markets react to
the OCI.

Speaker 2 (00:07):
Cut, Yeah, Look, interest rates across the curve, we saw
them move lower about point one percent or so on
the back of THEOCR cut today. But interest rates have
already moved significantly lower in the lead up to this meeting.
So you know, take the two year interest right to
swap right, that's a real bell weather from mortgage rights.
That was down close too percent over the past six

(00:29):
weeks leading into the meeting today, So we had already
seen you know, decent moves lower in interest rates. And
then we think about currency. If we think about the
New Zealand dollar now versus the Aussie dollar, you would
expect that it's going to be pretty strong given we
now have diverging monetary policies. So New Zealand has embarked
on this cutting cycle versus our neighbors and Aussie are
now remaining firmly on the hold as it is. But

(00:51):
I would expect that these market reactions that they will
likely extend over the next twelve twenty four hours as
offshore markets get involved in digest the cut today.

Speaker 1 (00:59):
All right now on the market, we've got a lot
of interest rights sensitive companies and so I imagine this
would be a welcome relief to them.

Speaker 2 (01:05):
Yeah, yeah, definitely. So you know, in particular, property company,
retirement villages, retailers, their serprise, their movement, in their surprise,
they're all seeing the benefit of that cut. Today we
really saw in particular names that were quite beaten up
going for the duration of this year and pretty unloved,
we saw them come back into favor. So names like
key Weet Property Group end of the day up about

(01:27):
five and a half per sound Catman dou of about
seven percent, and that was going in comparison to the
overall New Zealand share market, which end of the day
up about a percent and a half. So good performance
from those right sensitive companies and taking back a bit
of the underperformance that we'd already seen today.

Speaker 1 (01:44):
So the fact that we're cutting rights already and that
they're the forecast is that these right cats will keep
on coming. Do you think this is going to cushion
the blow to the economy.

Speaker 2 (01:52):
Yeah, Look, it's it's something that only time would tell.
The Governor orders said today that were likely in the
darkest period right now. So you know, granted we have
had technical recessions, but ultimately for the most part and
in terms of the hard data that we get, we
have avoided that hard banding with everything coming crashing down
at once. But our data is lagging in terms of

(02:13):
you know, GDP, unemployment and inflation and risks really are
pointing towards worsening the economies and pressures are really mounting.
You know, we know unemployment is climbing, growth is negative
and it's likely to remain. So the housing markets muted,
and we've migration falling with the mass exodus of Kiwis
to Uzzi. So you know, even if we look externally,
the US is flowing and China is pretty as we

(02:34):
looked in to start stimulating its economy. So there is
a real chance that the Urbians that you know, we
were the first to hike, they could be too late
starting to cut today and we could already have a
lot of damage done to the economy. But you know, unfortunately,
only time is going to tell.

Speaker 1 (02:48):
Yeah, hy Kaitlin, thanks for running us through that, man,
I really appreciate it. As Kaitlin Pack and milfed Esset Management.

Speaker 2 (02:53):
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