Originally Posted by
Beagle
I think you've hit the nail on the head. One real issue as I see it for the NZX is political risk. Overseas investors, (who own the majority of shares in NZX companies) are looking at the way this Government are running things with their woke policies. The recent noise about Govt interfering in private contractual law between tenant and landlord is massively corrosive to overseas investors confidence as is the tax changes with rental properties running roughshod over basic principles of interest deductibility that go back more than 100 years. Many of these properties are owned by overseas investors and they are thinking what's next ? The 3 waters theft of water assets is another thing setting off alarm bells. What other serious risks are obvious ? Reform of the retirement sector, reform of the electricity sector ? What else will they do in the name of social justice ? If this Govt can run roughshod over previously sacrosanct areas of tax and commercial law that go back to when Adam was a boy anything, literally anything is possible. This is a key question so I'll highlight it. If you were an overseas fund manager would you be reassessing the risks of investing in N.Z. assets ?
Our market has gone backwards this year, the worst performance in more than a decade and the worst I know of in the OECD... coincidence or the result of overseas investors losing confidence since Labour came to power ? You folks be the judge.
Another factor this year is of course the huge increase in 10 year Govt stock rates, up 200 basis points in a year and that in and of itself would normally translate to a reduction in the market PE of at least 2, so even with a bit of earnings growth we've seen PE contraction, arguably not enough taking into account the move in the 10 year Govt stock rate. I see little if any prospect of a year end rally for the NZX and the prospects for 2022 don't look especially encouraging to me. That's enough doom and gloom from me.
People, please feel free to ignore this post of you see things differently. Above are just two theories on why the market has performed very poorly this year. There's probably any number of other equally valid theories out there....but yeah, I have found the last two-three months a real grind.