Election? What election, investors ask?

By Nick Stride

Friday 14th June 2002

While the media went into a predictable pre-election frenzy this week, financial markets players who thought the poll would have any influence on asset prices were as rare as a kept political promise.

The consensus opinion was that overseas investors had great difficulty distinguishing between the major parties' policies.

Down in Wellington, Paul Dyer, head of investment strategy at AMP Henderson, said to call the election utterly irrelevant to the markets might be putting it a bit strongly.

"But we'd be surprised if it had a major impact. To an outsider the differences between the two major parties seem pretty small. You have two essentially conservative parties in a stable western democracy."

He said local investors tended to overstate the impact of political events but overseas investors generally regarded themselves as being a little more rational and farsighted.

"If we were to see any major movements on the back of this we'd regard them as a buying or selling opportunity, depending on which way it went," Mr Dyer said.

Over at Deutsche Bank New Zealand chief economist Ulf Schoefisch struggled to see any implications for the markets.

"Given the way the polls are going no change of government is expected," he said. "Maybe it'll be more interesting in three years' time."

Greg Whitten, chief investment officer at Tower Funds Management, said the last time there had been any politically driven market action in the runup to an election had probably been in 1996, when the first MMP poll was held.

"People here who've looked at issues associated with elections on a global basis have found the influence on financial markets is normally pretty much zero unless you take the view that the likely outcome is to completely alter the course of history," Mr Whitten said.

"I don't think there's anyone suggesting that in the current environment here,"

National Bank economist Steve Edwards said the only relevance of the election date was that it was well-spaced from Reserve Bank announcements on July 3 and August 14.

"It keeps the interest-rate decision completely separate from the electoral decision."

Craig Stobo, chief investment officer at BT Asset Management, thought the possibility of Labour having to rule with the Greens or the Alliance was being somewhat underrated. He gave the odds on that as a "non-negligible" 50%.

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