Stock Takes: Election winners and losers

Labour leader Jacinda Ardern is fighting a close election. Photo / Stephen Parker

With the election looking more likely to be a closely run race Stock Takes thought it was timely to look at the stocks which might win or lose should Labour be in a position to form the next Government.

CAPITAL GAINS TAX

Mark Lister, head of private wealth research at Craigs Investment Partners believes a capital gains tax is potentially the biggest policy change which could come to bear if Labour were in power.

But share investors would have much less to worry about than property investors.

Lister says over the past 20 years New Zealand shares have delivered an average annual return of 8.5 per cent but 71 per cent of that return is from dividends rather than capital gains.

Investors already pay tax on dividends at their marginal rate. Only those whose intent is to trade shares pay tax on their capital gains.

A CGT tax would potentially see all gains from share sales taxed which would impact the longer term hold and sell owners.

But Brian Stewart, a senior analyst at Forsyth Barr, says traders would potentially see a boon. They currently have to pay gains at their marginal tax rate or at the company tax rate if they trade via a company.

A proposed CGT rate of 15 per cent would see traders paying less tax if they currently pay it at the top 33 per cent tax rate or the 28 per cent.

"From the broking point of view we would be quite happy."

Lister says some of the higher dividend paying shares and sectors like the power companies Contact Energy, Genesis, Meridian and Mercury Energy, listed property trust and lines company Vector could benefit.

"A greater proportion of the returns from these are already taxed, so they have less to lose compared with the current regime."

RETIREMENT SECTOR SPOTLIGHT

But Lister believes the retirement village sector which includes Metlifecare, Summerset and Ryman Healthcare could face some uncertainty.

"They are leveraged to further gains in house prices, while their [tax position] could raise some eyebrows under a new government with a greater focus on tax fairness."

But Stewart is less convinced. He says Labour has already exempted the family home and retirement villages won't be directly impact by a CGT because they don't sell property - just rights to occupy.

He also points to evidence in Australia and Canada where CGT has done little to reduce house prices.

Both Labour and National have made it clear they don't want house prices to fall significantly.

Stewart says if house prices were to go lower it would be bad for consumer spending.

This would put more pressure on retailers who are already feeling the pinch from the growth in online retail.

Although Lister says on the other side a Labour government would like provide more support to lower income growth would could boost consumer spending slightly and provide support for the likes of Restaurant Brands.

WATER WORRIES

Investment experts say another area of concern is the potential for charges for the commercial use of water and its impact on farmers.

Rickey Ward, JBWere's New Zealand head of equities, says farmers are the most indebted group in the country so adding an additional cost may not be good for the country.

Stewart says farmers' cost of production would go up meaning they either have to produce less to reduce the cost or produce more and pay more.

That would potentially affect their spending power and hit rural suppliers like PGG Wrightson and Skellerup in the pocket too.

Ward says an unintended consequence could also see hydro generators like Meridian Energy captured.

"I don't believe that was the initial focus for the policy which was more positioned around environmental aspects and companies bottling water for distribution."

PRE-SCHOOL BENEFITS

One area which Ward believes could benefit under Labour are bigger operators of early childhood centres like Evolve Education Group.

Wards say increasing the requirement for centres to have 100 per cent qualified teachers would promote industry consolidation given the higher costs involved.

That could potentially benefit larger providers over smaller family operators, he says.