Stock Takes: Why are international markets performing so much better than New Zealand, Australia?

Is our housing obsession going to be our economic downfall? (Photo / File)

Ask the average businessperson today and they’ll tell you that the mood across New Zealand is pretty dour at the moment.

This is certainly reflected in the NZX50, which has remained flat at a time when the Nasdaq is entering bull market territory, up 30 per cent off the back of strong performance for tech and AI stocks. The S&P500 is also up by double digits and even Germany’s DAX has grown 12 per cent over the last year despite the ongoing war in Ukraine.

So what’s keeping NZ’s mood in the doldrums?

Speaking to Stock Takes, the Herald’s investments and markets podcast, Fisher Funds chief investment officer Ashley Gardyne said that defensive companies, which were one of the strongest categories in the market last year, have fallen this year.

“The New Zealand market generally is a more defensive market, as is the Australian market. We don’t have that much of a tech representation, we don’t have that many cyclical companies, and we do have a lot of electricity generators and REITs, and because of that, essentially we didn’t see much of a sell off in our market last year - but again, this year we’re not seeing the, the flip side of that.”

Gardyne said that while the New Zealand economy and the sharemarket should be viewed separately, he shares the view that “New Zealand is in a pretty tough patch at the moment.

“We look at the GDP number, it went backwards in the last quarter, consumer sentiment is pretty weak, residential construction, building permits, all of those things are sort of trending in the wrong direction, which shows that New Zealand consumers having a bit of a difficult time.

“At the same time, our share market actually often looks quite different. If you look at the broad makeup of our market companies like Fisher and Paykel Healthcare, or Infratil or perhaps Mainfreight actually have a large percentage of their earnings offshore.

“So when you have a period like this when the New Zealand economy is quite weak, it can actually benefit those companies with offshore earnings.

“And that’s probably another reason why our markets sort of hung in there this year, even though our economy is pretty weak and our housing market’s weak.”

The big difference for New Zealand versus the United States though is our housing market, Gardyne said, with our market now reflecting what the US went through during the 2008 global financial crisis.

“So back then everyone got loaded up on too much household debt. They generally had really short-term mortgage rates and they went through this period where their mortgage payments went up. A lot of people did get into financial strife and there was a real period of austerity for a few years as people tried to pay down their debt and, and the economy healed.

“We are starting to see that in New Zealand at the moment, and again, over a number of years, our house prices got extended, consumers put more and more money into housing, have borrowed more money, and now with mortgage rates going up, it is starting to have an impact on spending.”

Listen to the full podcast for more on how the markets have performed over the last month

Stock Takes is available on iHeartRadio, Spotify, Apple Podcasts, or wherever you get your podcasts. New episodes come out every Wednesday and are brought to you with support from Fisher Funds.