"There have actually been a number of headwinds in the real economy which has meant sentiment at least has been a lot worse than the economic growth numbers might have you believe," he said in a commentary.
"But the share market has carried on regardless and that's because it's been driven by companies whose share prices are really driven by falling interest rates," he said.
The power companies, with their bond-like qualities, have been at the forefront of the rally in this low interest rate environment, but news of the possible closure of major power user, the Tiwai Point aluminium smelter in Southland, dampened enthusiasm for the sector.
But South Island hydro power generators Meridian and Contact Energy have seen their share prices rally sharply after state-owned grid operator Transpower said it would re-start work on a critical link in the network, which would go some way towards offsetting the effect of Tiwai's closure, should it come to pass.
Meridian's share price has risen steeply since Transpower said it would restart work on key links in the power network.
Contact and Meridian will finance the first summer's work on the Lower South Island grid which improves the Tiwai exit impact for these two companies materially.
Tiwai's majority owner, Rio Tinto, is due to decide on the smelter's fate early next year. If it leaves, it needs to give a year's notice.
Craigs Investment Partners head of institutional research, Grant Swanepoel, says prior to Transpower's decision there would likely have been two years when hydro dam water would have been trapped at the bottom of the South Island.
"While we model a Tiwai exit with no demand response, we are of the view that if Tiwai were to decide on an exit, a more orderly exit than a one-year notice would be negotiated," Swanepoel said in a research note.
Meridian shares, NZX trading
The Reserve Bank has softened its bank capital plans by allowing some of the increase to come from preference share capital raising rather than just common equity which includes retained capital and ordinary shares.
Raising capital
The central bank has said that will make the cost of raising the $20 billion cheaper. But Roger Beaumont, chief executive of the New Zealand Bankers Association, said banks should need to get their heads around preference shares and the demand for them. Around $9b of the $20b could be raised via preference shares.
Beaumont said he expected the majority of it would need to come via offshore investment as there wouldn't be enough demand locally.
Banks will have up to seven years to raise the additional capital starting from July but whether some will try and make the most of the first mover advantage will only be revealed over time.
Beaumont said it was too early to speculate on how soon the banks would move and it would be inappropriate for him to talk about the individual commercial practices of the banks.
But don't expect there to be any detailed plans from the banks any time soon. It took four to five months for them to work through their responses to the proposed capital changes and it's likely to be months before they have anything more to say on the changes.
ANZ shares, NZX trading
Expecting the worst
Was ANZ hoping for the best but expecting the worst when it asked the ASX to put its shares on a trading halt before the release of the Reserve Bank's changes?
As it turned out, the changes were not as stringent as the market had first feared, which let ANZ off the hook in terms of having to raise extra capital.
When trading in the stock resumed, ANZ shares rallied alongside the rest of the Aussie banks with operations here.
