Shane Solly: Harbour Asset Management spokesperson on China's efforts to stimulate its economy

Over in China, officials have outlined plans to further stimulate the economy amid an ongoing downturn.

China's Ministry of Finance announced that China would issue special sovereign bonds to recapitalise its largest state owned banks.

It would also allow local Governments to use RMB 2.3 trn of local Government special bonds to buy unsold homes.

Harbour Asset Management's Shane Solly explains what this development might mean for the markets.

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Episode Transcript

Speaker 1 (00:00):
With us. Now we've got Shane Solly of Harbor Asset Management, Hay.

Speaker 2 (00:04):
Shane, Hey, Heather, listen.

Speaker 1 (00:06):
I'm very well, thank you, Shane. I'm fascinated by what's
going on in China. So they're going to open up
the stimulus taps a little bit more.

Speaker 2 (00:12):
Yep. So again we've seen a few policy announcements the
last week or so. In the weekend we saw another
big announcement from the Chinese Master of Finance, their outlining
planing space to issue more debt to boost property markets,
recopitalize banks, assist local governments, and so. On Saturday, I
talked about the potential to issue special sovereign bonds to
recapitalize the big state owned banks, and it would also

(00:35):
allow local governments to use remember two point through tree
and of local governments special bonds to buy unsold homes.
Really important because the local governments have been pretty hamstrung.
They've had massive debt, and so this really allows them
to repay debt and actually put some stimulus back in
the economy pieces that's been missing in the Chinese economy. Now.

Speaker 1 (00:57):
Capital markets initially seem to be kind of disappointed by this,
should they have.

Speaker 2 (01:00):
Been well, look, it's a bit light on detail and numbers,
and this is what we've seen the last week also
in terms of these policy announcements. But certainly the Monster
of Finance was be patient. We've got some more policy
announcements coming. And you got asked a question about the
scarlet things. He said, look, I won't say now, but
it's going to be big, and that's pretty unusual. They

(01:21):
don't normally say stuff like that. There's a bunch of
policy events coming up to the National People's Congress later
in October, and it just feels like the Chinese regulators
are putting more and more and more layers of supporting.
It's certainly giving the economy a bit of a boost
off the bottom. So there is some upside here. We
had to see some more detail.

Speaker 1 (01:42):
Now what does this mean do you think for the
New Zealand economy.

Speaker 2 (01:48):
Look, we've got a bit of a way to go.
We do need to see how this goes in terms
of stimulating consumer confidence. That's what it's all about, right,
trying to give people confidence and housing markets and that
they can open up their own spending. And so if
it happens that it would actually be broadly supportive for
demand for New Zealand commodities, things like services like travel
if it improves confidence, and also would be a bit

(02:10):
of a boost to the Australian economy, which again is
helpful for a lot of New Zealand businesses the Australian activity.
But we've got to let it roll through. We've seen
a bit of a bounce, people are a bit more optimistic,
but we need to see some more detail.

Speaker 1 (02:24):
Yeah, fair enough. Now we've just been talking to Nicola
Willis about the easing and the foreign investment laws. What
do you reckon that means for the capital markets?

Speaker 2 (02:31):
Well, look, I think the best way putting it is
the current policy has restricted the breadth of offshore investment
New Zealand, and I think it has certainly pushed New
Zealand down the list of the destinations for investors to
go globally. So not anything that actually sees that maybe
we go back up the list, but I just sort

(02:52):
of obviously point to there's been some really good offshore
interest in our markets of late. There's obviously big bond holdings,
but more and there we had some massive capital raises.
Now the used the example of Auk and Eport raised
one point four billion dollars. We saw a big ejection
from global investors really attracted to attractive newsion infrastructure. So

(03:13):
I think there is plenty of appetite out there. They
just need to know that they're actually there's a framework
that doesn't penalize them. And I think also when I
come back, quious over cause are pretty powerful as well.
So you know, we have multiple services the capital. Just
freeing up that access to international investors will be helpful
to improve the pricing we get for our asses.

Speaker 1 (03:34):
Yeah, brilliant stuff. Hey, Shane, thanks for talking us through that.
Enjoy the receive evening that Shane Solly of Harbor Asset Management.
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