For some time now central bankers have been opining that our New Zealand dollar has been 'unjustifiably' and 'unsustainably' elevated in price relative to our major trading partners.
The constant rhetoric is that our currency needs to be lower and this will be of a large benefit to exporters and therefore our underlying economy.
Post the decision of the Reserve Bank to lower interest rates this month, we have now seen the NZD fall back to a level of 0.6535 cents versus the USD, remembering we were as high as 0.8810 cents back in late 2014.
Whilst we are an export led country and this is undoubtedly a tailwind for the sector, it does not come without other consequences, notably the relative 'cheapness' of many of our prime assets for offshore investors.
Just last month, Goodman Property Trust sold their interests in the VXV office portfolio, a cluster of seven office parks in Auckland to Blackstone Group, a US based global investment firm.
Vodafone NZ has been sold to a consortium (subject to commerce commission and overseas investment office approval) including Brookfield Asset Management, another global alternative asset manager who is co-listed on the New York, Toronto and Euronext stock exchanges. This is just the tip of the iceberg.
Locally, investors have been lamenting the move lower in interest rates and how it was making investors re-think how they were deploying their investments.
Despite this backdrop, yields of 4.00-6.00 per cent in a global context still remain attractive relative to investors in Europe as an example; when you consider they are able to fund at interest rate levels closer to 0.00 per cent.
Adding to this, we have a currency that has been in freefall further 'sweetening' the deal. This is not limited to the private market, since December 2017; our NZX50 (equity market) has returned circa ~20 per cent, with a lot of this outperformance coming in the form of foreign capital and a low interest rate environment.
Low interest rates are not unique to NZ, but this obsession with a lower currency to engineer imported inflation and boost exporters is proving highly attractive for foreign capital. Add in the political stability and relative ease of doing business in this country, then it is no wonder we are seeing many of our iconic companies being snapped up.
The counter argument will be that we have an Overseas Investment Office (OIO) to protect our national interests around key strategic assets.
However, with a number of private property deals and the recent sales of Trade Me, Restaurant Brands, Tip Top and Vodafone NZ are anything to go by; NZ is for sale; and to the highest bidder.
- Mark Fowler is Head of Investments at Hobson Wealth Partners.