She said the sharemarket may perform better with a National-led Government.
National has won six times, and Labour won five times in the past 11 elections since 1990.
The S&P/NZX50 rose 3.8 per cent on average following a National win in the three months post-election, and it fell 0.2 per cent on average during the same period following a Labour win, according to CMC data.
In the longer term, the S&P/NZX50 rose about 6.2 per cent on average over the period of a National-led Government, while the index rose 1.2 per cent on average over the Labour Party’s governing term.
“These statistics suggest that the local stock market is more cheerful for a right-wing-led Government whose policy is usually more pro-economic growth,” she said.
New Zealand’s GDP jumped to US$201.31 billion ($339b) in 2014 from a trough of US$121.37 billion in 2009, over the period when the National was the leading party. In the meantime, GDP growth was much flatter over the period of a Labour-led Government, Teng said.
“However, this stock market performance pattern does not necessarily apply to the period from the election day to year-end, as the immediate market reaction can be impacted by other factors such as the central bank’s monetary policy, transitionary uncertainties, and liquidity conditions.”
National has won three times and Labour four times in the past seven elections.
The average performance of the index is a 1.3 per cent increase for National victory and a 3.2 per cent rally for Labour from the election day to the end of that year, Teng said. “But this concludes that elections tend to boost the stock market in the short term, whichever party wins the election.”
Teng said a National Party win may strengthen the Kiwi dollar.
“A National Party win tends to hold the New Zealand dollar’s strength as the party’s policy is more pro-economic growth and boosts business and investment confidence, in turn firming the local currency.”
Beaten up stocks
Share prices continued to fall prey to the inexorable rise of interest rates over September.
US Treasury yields climbed to a 16-year high this week. The benchmark 10-year Treasury yield rose 0.13 basis points to 4.70 per cent, the highest level since 2007, after better-than-expected manufacturing data bolstered investors’ belief that the US economy is in good shape.
The better the economic data out of States gets, the less likely an imminent rate cut from the US Federal Reserve gets, adding more fuel to the debt markets.
At home, the two-year swap rate this week hit 5.80 per cent - the highest point since 2008 - and rates across the curve are at various multi-year highs.
The S&P/NZX 50G returned minus 2.2 per cent in September, bringing the benchmark index’s 12-month return to plus 2.1 per cent, while falling 5.2 per cent for the quarter, broker Forsyth Barr says.
The NZX Industrials were one of the only sectors showing signs of life (plus 0.7 per cent) while the NZX Materials felt the most hurt (minus 6.1 per cent) in what was a rough month for almost all sectors of the New Zealand market.
The month of September finished with 20 positive returns, 30 negative returns, and an overall range of 30.4 per cent.
Top performers for the month included Pacific Edge (up 15 per cent), Skellerup (up 12 per cent), Serko (up 10 per cent), while Sky City (down 15 per cent), A2 Milk (down 9 per cent), and Stride Property (down 9 per cent) performed the worst.
The main (positive) contributors to the index were Auckland International Airport, Infratil, and Serko, with Fisher & Paykel Healthcare, EBOS and a2 Milk providing the largest negative contributions for the month, Forsyth Barr said.
In the year to date, Serko was streets ahead, with an 82.6 per cent return, according to Bloomberg data.
Ryman came second with a 21.6 per cent gain and Infratil was third with 15.6 per cent.
Losers for the year to date were Pacific Edge, down 78.6 per cent, Synlait 59.8 per cent, and a2 Milk down 39 per cent.
Bond yields up
Craigs Investment Partners investment director Mark Lister says the bulk of the rise in bond yields seen over the last couple of months has been because inflation has been much stronger than expected.
“It’s surprised people and that has meant that central banks have shifted interest rates higher than people expected them to,” Lister said.
Economies - including New Zealand’s and America’s - have performed more strongly than expected, and stronger economies normally come with inflation attached.
“There is a positive and negative side of this coin.
“You have got much more economic resilience than people expected, which is good because it means that the economy is in better shape, but it also means that interest rates are staying higher for longer,” he said.
“It’s a tough environment for equities investors.
“For bond investors, or for conservative folk, things look better and better the more that interest rates go up.
“It just depends on which asset class is your preferred measure of choice.”
High borrowing costs will be making their presence felt on corporate finances, and higher interest rates mean less money in consumers’ pockets after they refix their mortgages at higher rates.
“But that is also balanced off with there being no recession. Everyone was expected there to be a recession in New Zealand by now and in the US - and we have not seen one, so we can’t have our cake and eat it too.”
Liseter said that if there is a change of government, as the polls suggest, would inject some life into many businesses over the short term.
In the meantime, fixed-interest investors are enjoying rates not seen in well over a decade.
“For the first time in years, you are getting a return on your money,” Lister said.
“There are asset classes that have looked terrible for years and all of a sudden they look good again.”
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
