Friday 28th July 2000
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|Dow Jones transportation average|
Sharemarkets around the world appear stalled in wait-and-see mode until the US Federal Reserve makes its reviewed policy on interest rate settings known on August 22.
So far the market has second guessed optimistically, which would suggest limited upside if its expectations are met by the Federal Reserve turning dovish on interest rates and significant downside risk if the Federal Reserve disappoints by taking a hawkish line.
Rising interest rates do not necessarily knock sharemarkets over. Much depends on the outlook for company profitability, which has a rosy outlook in the US, sustaining share prices overall there. Not so in New Zealand, where the low dollar and high interest rates, combined with anti-business government policy, are starting to bite into profit expectations and dampening the sharemarket.
Of longer-term significance to the outlook for the sharemarket is the negative verdict passed on the Treaty of Waitangi gravy train passed by the Singaporean government in wanting written assurances over property rights in New Zealand under the proposed Closer Economic Partnership (CEP). At last New Zealand has a foreign opinion on its drift toward subordination to tribal collectivism.
The Singaporean reservations, which are entirely reasonable, place our country's treaty troubles in the international investment limelight as a possible reason not to invest here.
Our economy could lose international competitiveness as non-Maori property rights are eroded and Maori danegelds and race royalties are imposed throughout its cost structure. Australia, potentially poised to go down the same autocannibalistic treatyist path over Aboriginal claims, will be paying close attention to avoid our mistakes and woo foreign investors.
Singapore is well placed to judge the treaty cargo cult for its international trade and investment implications. The multiracial country has about the same population as New Zealand but lacks our natural resources.
In just a few decades it has evolved from third-world backwater receiving foreign aid from New Zealand to first-world trading hub with one of the highest per capita incomes.
It has consistently refused to embroil its multi-ethnic society in race favouritism because it could foresee the sort of danger it now imputes to New Zealand.
New Zealand is at a watershed. It could become a truly non-racist internet-era society like Singapore, which has built itself on colour-blind respect for private property rights or it could revert to the Stone Age down the indigenous apartheid path Fiji is treading and join the third world wherein no one is secure in ownership of anything and the law of the warclub prevails.
The choice has far-reaching implications for the merits of investing in the dwindling sharemarket and is one of the most fundamental matters challenging this society.
Overseas indices are not much departed from previous established levels. The Dow Jones transportation average (illustrated) is holding up quite well in the face of easing oil supply. The NZSE top-40 capital index has slumped under resistance at 2150, due in part to Telecom's continued gravitation towards 700cps.
Some major listings are firming up such as Auckland International Airport and Fletcher Building, but others such as Fisher & Paykel and Sky City seem capped at earlier highs after a strong recent run. Much market action promises to amount to position-taking until the pace for interest rates is settled later in August.
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