De-risk from China: Companies and investors warned

New Zealand listed companies linked to China’s economic growth, and investors that own them, should de-risk from our largest trading partner.

That warning comes from New Zealander David Skilling, an economic and policy advisor who founded Landfall Strategy Group in the Netherlands.

“New Zealand firms need to understand that China is not a risk-free bet that it has been, and some of those risks are increasingly looming quite large.” Skilling told Markets with Madison.

He told investors that our companies reliant on China were unprepared for potential disruption in the geopolitical relationship between China and the United States, and they should not wait for those risks to play out in their portfolios.

“Many New Zealand firms are still catching up with that new reality.

“We’re not going to be able to dodge that for too much longer either, because something’s going to go wrong in a bilateral relationship, that’s no fault of our own ... Or frankly, a choice gets forced on us either by China, by Australia, or the US.”

He urged companies to consider how much risk they wanted to carry on their balance sheets, and look to diversify markets or reject supply chains.

Although, he added it would be a costly exercise in the interim and hurt investor returns.

“You’re essentially paying an insurance premium, you’re giving up some profit margin to the risks against a future outcome that may or may not happen.

“If you’re the only person in your market that’s paying that insurance premium, you’re going to lose market share, your shareholders or your board is not going to be happy.”

But, complacency could be more costly, he said.

“If we continue with path of least resistance, we are going to be accumulating a bunch of risks on the way through.”

Watch today’s episode of Markets with Madison above to see which NZX-listed companies are most exposed to China’s economy.

Get investment insights from the experts on Markets with Madison every Monday and Friday on the NZ Herald.

Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.

Madison Reidy is the host of New Zealand’s only financial markets show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.