NZX hits new high; doubles since 2009

The New Zealand Sharemarket NZX50 reached a record high above 8000 points yesterday, as one of the most important anniversaries in sharemarket history moves closer.

Thirty years ago on October 19, the NZX plunged 14.7% as New Zealand's greatest financial bubble collapsed, leaving New Zealand investors wondering where their money had gone.

The collapse ended the 1980s sharemarket boom, which had entranced the country.

Fortunes evaporated as share prices crumbled and 181 companies delisted from the NZX in the following four years, most of them in receivership.

Investors turned their back on the sharemarket and diverted their attention to residential property.

This time, the rise in the value of the NZX50 has been steadier and built on companies doing well in their own right, rather than on speculation.

The market has now more than doubled in value since 2009, in the wake of the global financial crisis. It is up 14% so far this year, and yesterday closed at 8010.28. It was the fifth straight year of above-10% gains.

Craigs Investment Partners broker Chris Timms said yesterday the Australian market was also up, but not as strongly as the NZX.

The main Chinese sharemarket reached a 21-month high.

Several companies had helped lift the NZX, including The a2 Milk Company, F&P Healthcare and Synlait.

''It has been strong across the board. So much for uncertainty for the market during the coalition talks.''

Low interest rates in New Zealand, combined with robust company earnings, had attracted overseas investors to the New Zealand market.

Most people seemed relaxed about the formation of the next government. Labour had taken capital gains tax off the table but had promised to spend more and pay off debt more slowly.

More spending was good for the market, Mr Timms said.

BNZ head of research Stephen Toplis said while the political hue of the next administration was yet to be determined, New Zealand First would have an impact.

''What we can say, though, is New Zealand First will - either in government or on the cross-benches - influence policy.''

The most likely impacts would be the age of entitlement to superannuation payments capped at 65; more entitlements for the elderly; tighter rules on foreign ownership of New Zealand assets; tighter rules on migration; and some alteration to the Reserve Bank's policy framework.

The thing most economy watchers seemed to be interested in was the potential for net migration to fall under NZ First influence, Mr Toplis said.

''We believe this is an inevitable outcome but stress we also think net migration will moderate anyway.''

The net migration inflow for the year ended August was just above 72,000.

Current forecasts were predicted on a similar inflow in calendar 2018 before dropping steadily to 35,000 in the following four years.

It was assumed there was room for give and take on both sides of any negotiation, so it would be reasonable to hope some middle ground could be reached between what was seen as an extremist NZ First position and the status quo.

The Reserve Bank was likely to move to some form of committee decision-making process no matter the hue of the government.

The exact form of the committee would depend whether National or Labour ruled the roost.

With NZ First's influence, some changes to the Policy Targets Agreement could be expected, though it was doubtful the parties' focus on the exchange rate would be implemented in a meaningful way, Mr Toplis said.

More generally, it should be remembered minor parties did not set political or policy agenda. Instead, they blocked policies they did not like and negotiated for policy compromises when they could.

Whatever the outcome, he expected an announcement on Thursday as it was NZ First leader Winston Peters' self-imposed deadline for a decision.

It would appear to be in National's and Labour's best interests to sign up to this deadline, although either of the big parties could yet force a delay in proceedings.

''The outcome could really go either way but if we had to make a call, we'd lean ever so slightly to a National-led government,'' he said.

The US Federal Reserve would also release its meeting minutes on Thursday.

The minutes followed Friday's shock non-farm payrolls release for September when the number of people employed plummeted by 33,000, the first fall since 2010.

ASB chief economist Nick Tuffley said there were some bright spots in the payrolls data, including an acceleration in wage pressures.

The lift in wages added to expectations the Fed would lift interest rates in December. The market was pricing in an 80% prospect of a rise.

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