Why Australia and New Zealand should be on investors’ radars

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26 mins. to read
Why Australia and New Zealand should be on investors’ radars

They are non-identical twins on the other side of the world. Despite their shared language and historical DNA they are very different. They are both amongst the most prosperous nations on Earth in GDP-per-capita terms. They both command immense resources (though of different kinds) and benefit from some of the best educated populations. The quality of life in both countries is exceptional. Yet Australia and New Zealand are often off-radar for UK and US investors.

Why? Because they are so far away? In a digital age geographical proximity accounts for less. Besides, air links are improving by leaps and bounds. In March Qantas (ASX:QAN) launched its 17-hour non-stop service between London Heathrow and Perth. They are already talking about the viability of a non-stop service between London and Sydney. The new generation of airliners coming on-stream soon will be able to fly London-Auckland non-stop. 

In a globalised world a shared language, legal code, and political and cultural values still count for a lot. Investment in Australian and New Zealand equities is a way by which UK and US investors can diversify into two consistently growing economies while undertaking minimal political, legal and regulatory risk. Currency risk is also manageable. Moreover, opportunities abound down-under…

Young and rich

These two young countries have achieved astonishing levels of well-being in their relatively short histories and have huge future potential. Australia has the 10th highest GDP-per-capita in the world in nominal terms while New Zealand is in 19th place. Australia, the size of the USA minus Alaska, has a population of under 25 million while New Zealand has 4.8 million people (though its population has grown by about 15 percent in the last four years).

True, there is minimal manufacturing in both countries. Ford Australia’s engine and vehicle plants closed in October 2016 and the Holden and Toyota Australia factories closed in late 2017 since when all cars are imported. Principal automotive imports are from Japan (Toyota (TYO:7203), Honda (TYO:7267) and Mitsubishi (TYO:8058)) and Korea (Hyundai (KRX:005380) and Kia (KRX:000270)). But the service and commodity sectors are booming. If the bedrock of Australia’s prosperity is mining, New Zealand’s is agriculture.

Australia is a very significant country, financially speaking. The Australian Securities Exchange (ASX, based in Sydney) has nearly 2,200 listings and has a market capitalisation of about US$1.3 trillion making it the eighth largest equity market in the worldand the second largest in the Asia-Pacific region. The Australian foreign exchange market is the seventh largest in the world in terms of global turnover, while the Australian dollar is the fifth most traded currency. The Australian Dollar-US Dollar trade is the fourth most traded currency pair worldwide.


Partly as a result of its compulsory superannuation system, Australia has the largest pool of funds under management in the Asia-Pacific region, and the fourth largest in the world. Finally, the big four Australian banks – Westpac (ASX:WBC), Australia New Zealand Banking Group (ASX:ANX), National Australia Bank (ASX:NAB) and Commonwealth Bank of Australia (ASX:CBA) – are truly international universal banks which also dominate New Zealand’s banking sector.

The New Zealand market is much smaller. The NZX, based in Wellington, has around 300 listings with a market capitalisation of US$99 billion in April. As I discussed in a recent article, there is a worrying tendency for NZ companies to delist from the NZX and to list in Australia, often using so-called backdoor listings. Moreover, a number of NZ listed entities have been acquired by foreign purchasers of late. The result is that the NZX has been getting smaller.

Despite a relatively benign economic backdrop the New Zealand stock exchange, the NZX, continues to draw criticism. The NZX is trying to improve liquidity and is consulting with the investment industry on how to channel more trading through the formal market as opposed to off-market trades which obscure price transparency. To this end the NZX is overhauling its price structure and bringing its trading and clearing model into line with global norms.

Table 1 Australia & New Zealand compared with other Anglophone countries

Country[i] Land Area Population 2018 GDP/capita – nominal – PPP
Australia 7,692,024 km2 24,919,800 $55,707-$49,882
Canada 9,984,670 km2 34,653,100 $45,077-$48,141
New Zealand 268,021 km2 4,877,460 $41,593-$38,502
United Kingdom 242,495 km2 65,648,054 $39,735-$43,620
United States 9,833,520 km2 327,051,000 $59,501-$59,495

 

New Zealand has a somewhat lower standard of living than Australia – though it has a GDP-per-capita comparable with that of Britain. Unlike Australia, it enjoys a generous social system with free healthcare provided by the state. The quality of life of both countries, taking into account the absence of pollution and hours worked is amongst the best in the world. Both countries boast very high levels of life expectancy (82.8 years for Australia and 81.6 years for New Zealand).

The Australian economy advanced 0.4 percent in Q4 2017, after an upwardly revised 0.7 percent growth in the previous quarter. It was the weakest growth rate since a contraction in Q3 2016. Overall in 2017 the economy grew by 2.4 percent, slightly below expectations of 2.5 percent growth. GDP Growth Rate on a quarterly basis in Australia averaged 0.85 percent from 1959 until 2017, reaching an all-time high of 4.40 percent in Q1 1976 and a record low of minus 2 percent in Q2 1974. Almost alone amongst Western nations, Australia (and New Zealand) sailed through the Financial Crisis of 2008 unscathed.

New South Wales is still seen as the powerhouse of the Australian economy and considers itself the model for other states. Sydney is the financial and cultural if not the political capital of the country and the home to many of Australia’s largest companies.

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During April, normally breezily confident Australian leaders expressed grave concern over the prospect of a US-China trade war. Politicians lectured the Aussie public about “the perils of protectionism”. On 06 April Labor Trade spokesperson Jason Clare, in a speech to a Perth business breakfast said he found it hard to believe that the world’s two largest economies “would be sucked into the vortex of a full-blown trade war”. Australia regards itself as a beacon of free trade.

For a nation of just 25 million people, Australia punches above its weight in sport, science and medicine. It is culturally vibrant and is a must-see tourist destination.

On 12 April economic forecaster Infometrics slashed its growth forecast for the New Zealand economy citing short-term headwinds created by government policy. The prediction made by Winston Peters MP, Deputy Prime Minister and Foreign Minister, last year that an economic correction was due appears to have been correct. Infometrics now sees GDP growth slowing to 2.4 percent by the end of 2018 and slipping below 2 percent in 2019 – almost one percent lower than previous forecasts.

Part of this is due to a slowdown in migration and in the housing market – already in train before the new government came to power last October. But Infometrics thinks that the cancellation of numerous road construction projects in favour of rail and public transport initiatives will cost jobs. Supply-side constraints in the construction sector are also a brake on growth.

Infometrics forecasts that net migration will fall from 68,900 in the year to March to below 17,000 by 2021. So long as Australia is growing faster than New Zealand, given freedom of movement between the two countries, young Kiwi talent is likely to head across the Tasman Sea and fewer New Zealanders working in Australia will want to come home.


The Prime Minister since October last year, Jacinda Ardern, is considered to have had a good first hundred days – but there are signs that her government is flagging as she prepares to go on maternity leave. (Yes, New Zealand is right-on socially progressive.)

Ms Ardern, 37 years old, a feminist who once worked in the UK Cabinet Office, became the leader of the Labor Party only seven weeks before last year’s election when it was lagging in the polls. Her fresh and outspoken approach benefited Labor. In the election of 23 September Labor’s share of the vote went up from 25 percent in the previous election to nearly 37 percent and seats won increased from 32 to 46. In order to gain power, however, Ms Ardern was forced into a surprise coalition with Winston Peters’ populist New Zealand First Party (9 seats) and James Shaw’s Green Party (8 seats). She therefore leads a government with a majority of only 7 seats over the National Party, now led by Simon Bridges MP.

The National Party (roughly analogue to the Conservative Party in the UK) is still tainted by the revelation that one of its MPs, Jian Yang, who immigrated to New Zealand from China in 1999, covered up the fact that he used to teach at a Chinese spy school.

Some Aussie stars and potential unicorns

Internode is an Adelaide-based internet service provider founded by Simon Hackett (see below) in 1991. It was acquired by iiNet for AU$105 million in 2012.

RedFlow (ASX:RFX) is a Brisbane-based listed entity currently valued at around AU$64 million. Its major shareholder, director and ex-CEO, is serial tech tycoon Simon Hackett. The current Chairman is Brett Johnson, formerly a long-time member of Qantas’s general council; the CEO is Tim Harris, the former CEO of Chorus in New Zealand. Former Santos boss David Knox is also an investor. Redflow is a high-tech start-up with proprietary technology in lithium battery production. Mr Hackett sees parallels between the fledgling energy storage market of today and where the internet was in the early 1990s. This is a very speculative stock. The shares are well down on a 12-month basis but went from AU$0.12 to AU$0.14 in April.

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Sundance Energy Australia (ASX:SEA) is raising AU$331 million – almost six times its market capitalisation – to fund a AU$221.5 million acquisition of acreage in Texas’s Eagle Ford shale basin from Pioneer Natural Resources and its joint venture partners. The company expects to be able to produce up to 22,000 barrels of oil equivalent a day by 2019 generating estimated revenues of US$250 million a year. This deal, if it goes through, will transform Sundance from a low-profile player into a major Australian oil and gas stock. Sundance has been active in the USA since 2006. The only Australian oil group to have cracked the US shale sector previously was Aurora Oil & Gas which sold its Eagle Ford basin position to Baytex Energy (TSE:BTE & NYSE:BTE) in early 2014 for US$1.8 billion at the top of the oil market.

BHP Billiton (LON:BLT & ASX:BHP) infamously lost billions in the US shale sector from which it is still trying to extricate itself. Specialist investors who understand the US shale sector might nonetheless wish to be a part of the Sundance deal. Jon Bishop, an analyst at Euroz (ASX:EZL), the joint underwriter of the issue, says that Sundance has picked up “a unique opportunity”.

Australia’s retail giants: “The three Ws”

Wesfarmers (ASX:WES) with its HQ in Perth is a massive Australian retailer which owns, amongst other chains, the DIY and hardware chain Bunnings Warehouse and Australia’s number one supermarket chain, Coles. But when it comes to success overseas, one of Australia’s most outward-bound companies has met with disappointment. Bunnings bought DIY chain Homebase in the UK from Sainsbury’s (LON:SBRY) in February 2016. Bunnings then sought to rebrand Homebase in its own colours and to focus on barbeque equipment and garden furniture in a country with a much wetter climate than that of Australia. The result was an almost immediate loss of market share. Bunnings, assisted by Lazards, is expected to reinstate the Homebase brand in the UK in due course. Bunnings Warehouse is also the leading DIY superstore chain in New Zealand.

Coles has over 100,000 employees and, together with rival Woolworths, accounts for more than 80 per cent of the Australian grocery market. It has over 800 superstores and another 600 convenience stores mainly located in petrol stations, generating revenues of AU$33 billion. Coles Online is the company’s online shopping (“click & collect” and home delivery) service. Recently Wesfarmers announced its intention to demerge the Coles business, seeking to retain only a 20 percent stake going forward.


Westfield Corporation (ASX:WFD) & Westfield Group (ASX:WDC). Founded in 1960 by legendary immigrant from Slovakia Frank Lowy – who is often cited as Australia’s richest man[ii]– the company owns shopping malls across Australia, the UK and the USA – including London’s two largest malls. In June 2014 Westfield split into two listed entities – Westfield Corporation taking the international assets while Westfield Group manages the Australian and New Zealand real estate portfolio. Westfield Corp’s shares spiked in December since when they have vacillated.

Woolworth’s Group (ASX:WOW). It may come as a surprise to British and American visitors to learn that Woolworth’s is alive and well and living in Australia! This brand famously died out in the UK in 2009. Woolworths Group, affectionately known as Woolies, is a major Australian retailer with high-end supermarkets throughout Australia and New Zealand. It is the second largest company in Australia by revenue, after Wesfarmers, and the second largest in New Zealand. In addition, Woolworths Group is the largest takeaway liquor retailer in Australia and the largest hotel and gaming poker machine operator. With over 200,000 employees the company had revenues of AU$59 billion in 2016 but was narrowly loss-making. The company’s shares have traded in the AU$25-28 range over the last 12 months, though in April the share price experienced a pronounced upturn.

Airlines: the kangaroo and the silver-backed fern

Qantas (ASX:QAN) is the flag carrier of Australia and its largest airline by fleet size, international flights and international destinations. It is the third oldest airline in the world, after KLM and Avianca, having been founded in November 1920. It began international passenger flights in May 1935 as the “Queensland and Northern Territory Aerial Services” and was nicknamed “The Flying Kangaroo”. Qantas is a founding member of the Oneworld airline alliance.

A significant international player with a truly global route network, Qantas is also the owner of Australia’s number one budget airline, Jetstar. The CEO of Jetstar since last November is Gareth Evans who was previously CEO of Qantas. The airline has carried more than 250 million passengers since it was set up in 2003. The airline’s route network extends across Australia and New Zealand where it has 20 percent of the internal airline market. It has a fleet of eight Airbus A320s and five Bombardier Q300 aircraft. It has an order for several Airbus A321NEO airliners to be delivered in mid-2020.

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Air New Zealand (NZX:AIR), founded in 1940, is the country’s national flag carrier. Based in Auckland, the airline operates scheduled passenger flights to 20 domestic and 31 international destinations in 19 countries around the Pacific Rim and the United Kingdom. The airline has been a member of the Star Alliance since 1999.

During the week of 16 April AIR cancelled a number of scheduled flights further to the incident in the USA when a Boeing 787-Dreamliner experienced problems with a Rolls Royce Trent 1000 aero-engine. AIR operates 11 such aircraft. This was particularly disruptive as it coincided with the New Zealand school holidays.

Wine is money

The Australian wine industry has established itself as a major provider of high quality and varied wines to the world. In April CHAMP Private Equity did a deal to sell Accolade Wines to global buyout firm The Carlyle Group (NASDAQ:CG) for reportedly in excess of AU$1 billion. Accolade is the largest producer of Australian wine and its labels include Hardy’s, Leasingham, Grant Burge, St Hallett, Petaluma, and Croser. It ranks in the top wine producers globally with AU$350 million of exports annually to 140 countries. Carlyle bought both CHAMP’s 80 percent stake plus the 20 percent stake owned by US liquor company Constellation Wines (a subsidiary of Constellation Brands (NYSE:STX)). CHAMP effectively created Accolade in 2011 when it bought Constellation’s Australian and European businesses for AU$290 million. Accolade is on track to make an estimated AU$100 million this year. The new owner is expected to accelerate Accolade’s Asia strategy – meaning selling more wine to China where the market is growing at about 50 percent per year.


Accolade operates the largest wine bottling, packaging and distribution centre in Europe – Accolade Park in Bristol, UK which employs 500 people. The company is replicating this facility in Berri, South Australia. Accolade was to have been listed on the ASX but according to Australian sources the floatation was pulled due to uncertainty around Brexit. Carlyle reportedly outbid US private equity house TPG and European group PAI Partners.

Outdoor clothing NZ style: Kathmandu Holdings

Outdoor equipment and clothing manufacturer Kathmandu (NZX:KMD & ASX:KMD) is a NX brand born in the mountains according to its French CEO Xavier Simonet. In March the company acquired US footwear business Oboz Footwear for US$60 million which provides a unique distribution channel, retail and wholesale, for the company’s products in the USA. Already 10 percent of sales are generated there. Kathmandu employs 2,000 people – 160 at its Christchurch HQ, 60 in Melbourne (where Simonet is based) and more than 1500 throughout its chain of 163 retail stores throughout NZ and Australia – plus one flagship store in London’s Kensington. A more extensive UK store network was closed in 2015. The company was given an award for ethical fashion practices last year for its commitment to send zero waste to landfill. It recycles 100 percent of all plastics it uses.

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For the six months to 31 January, Kathmandu reported profits of NZ$12.3 million – up 23 percent on the previous year with better margins given lower clearance stock. Sales rose 4.3 percent to NZ$204.8 million. Like-for-like store sales were up by 7 percent in the first six weeks of the current half-year. The company’s strategy is to focus on the expansion of online sales in Australasia and internationally.

This is a volatile stock. The retailer’s shares hit rock bottom in June 2012 at NZ$1.27 and hit an all-time high in 2014 of NZ$4. It is currently trading at a 12-month high of around NZ$2.60.

New Zealand’s film and media industry

One of the things that pushed New Zealand forcefully onto the bucket lists of the world’s better heeled tourists was the Lord of the Rings film trilogy which, as everyone knows, was filmed there. You can now visit the Hobbiton movie set – it has become a very tasteful theme park in Matamata (not far from Auckland) on the North Island. The great battle scenes were shot in the glorious Southern Alps not far from Queenstown.

What is not so well known is that New Zealand, despite its small population, has an important movie industry. Wellington, the capital, is the traditional home for movie companies but Auckland is catching up fast. Foreign movie production companies are flocking to New Zealand to make their films thanks to the wonderful scenery combined with excellent infrastructure and technical talent. Shooting recently finished in Otago province for Mission Impossible: A Wrinkle in Time.


Annabelle Sheehan, CEO of the New Zealand Film Commission, who was previously CEO of the South Australia Film Commission, said in a recent interview: “Hollywood Studios know our country well and appreciate working here with great crews. But one has to keep building and maintaining relationships to remain competitive”. It is rumoured that Disney’s forthcoming blockbuster Mulan and James Cameron’s planned sequel to Avatar will be filmed in New Zealand.

The special effects company Weta Workshop based in Miramar (North Island) has met with international acclaim for its contribution to films such as the blockbuster Pacific Rim: Uprising.

The Kiwi hospitality industry is on a roll

New Zealand’s providers of accommodation of all kinds achieved a record 39.6 million guest nights in the year to February – up 2.8 percent on the previous year according to Statistics New Zealand[iii]. 44 percent of those guest nights were accounted for by foreign visitors. The upsurge in tourism and hospitality has provoked a flurry of hotel developments.

International guest nights were well up in the South Island with large increases in visitor numbers for Christchurch, Queenstown, Kaikoura, Southland and Dunedin. New Zealand offers the full spectrum of hospitality options from five-star hotels, through motels, holiday parks, campsites, self-catering apartments and backpacker hostels. But the clear trend in New Zealand tourism is towards the higher end: luxury hotel stays are on the rise while the backpacker market seems to be in decline.

The survey found that, overall, hotel occupancy rates increased to an all-time high of 81.8 percent. Some of the world’s biggest hotel brands have established themselves in New Zealand. A few, such as Hyatt (NYSE:H), have entered or returned to the market in the last few months and more, including Ritz-Carlton, are rumoured to be on the way.

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New Zealand’s biggest owner of hotels is CP Group, with 17 hotels and 8 per cent of the country’s hotel rooms[iv]. Owned by the Pandey family, CP Group has been both an active developer and owner of hotels. It bought three hotels last year from the exiting Host Hotels and Resorts Group (NYSE:HST) and recently converted offices into the 129-room, Sofitel Wellington at a cost of NZ$51 million. It is also converting Auckland’s former Reserve Bank building into a Sofitel.

The next biggest player is Singapore’s CDL Hospitality Trusts (SGX:J85), which owns 12 hotels representing 6 percent of the market. CDL’s portfolio has not changed in several years. However, it is refurbishing the former Copthorne hotel in Auckland’s waterfront, turning it into a five-star, 190-room Millennium Hotel in early 2017. It will also take over the management of the 452-room Rendezvous Hotel in September, renaming it the Grand Millennium Auckland.

France’sAccor SA (EPA:AC) which owns the Ibis and Novotel brands manages 17 percent of all hotel rooms, followed by Singapore’s Millennium (LON:MLC) with 8 percent. Australia’s Choice Hotels (NYSE:CHH) has 5 percent. Heritage (NZ), Rydges, Britain’s Intercontinental (LON:IHG), Distinction (NZ) and Australia’s TFE Hotels are also significant players.

Did you hear the one about the Kiwi aerospace industry?

It is common to hear people say there is no manufacturing in New Zealand – but that is not quite true. Hamilton-based aircraft manufacturer Pacific Aerospace (private) has been making small civil aircraft since the 1950s and currently employs about 180 people. However, the company is currently in the doldrums. Only one aircraft has been rolled out of the hangar since February last year according to local sources[v]. The CFO and the commercial general manager both left within a month of each another. And, to ice the cake, the company stands accused of sanctions-busting in North Korea. However, the company claims to have firm orders and new models in the pipeline including for the Papua New Guinea Defence Force.

The main product is the multi-purpose 10-seater P-750 XTOL (extreme take-off and landing) aircraft. The planes are thought to sell for about NZ$2 million each. In 2016 a joint-venture was announced with Chinese state-owned aviation giant Beijing Automotive through BAIC International (Hong Kong). The plan was to make up to 40 aircraft per year in Hamilton, half of which would go to China. That is not how things have turned out. According to the Weekend Herald a factory in China is now manufacturing P-750s using staff trained in Hamilton.


Currently the company is 50 percent owned by the Chinese and 50 percent by pacific Aerospace Group. The latter is 33 percent owned by PAHL Ltd owned by the Camp brothers and 67 percent by Auckland property and agribusiness investor Nicsha Farac.

There is also a NZ satellite launch company funded by Kiwi Peter Beck. It is called Rocket Lab. In mid-April it delayed its first commercial satellite launch by “a few weeks” because of an unspecified technical issue. It uses the Electron rocket which has a payload of 150 kilograms. It owns a launch site on the Mahia Peninsula (on the west coast of the North Island). The payload for the next launch is reportedly satellites for ship-tracking company Spire Global and weather-monitoring company GeoOptics. Rocket Lab’s first successful test launch was in February.

To reign or not to reign: the future of the monarchy in Australia and NZ

Many visitors arrive in Australia and New Zealand and are amazed to see the face of Queen Elizabeth staring at them from bank notes and coins. The UK monarch is Queen of Australia and Queen of New Zealand.

The Pressof New Zealand’s South Island reported on 20 April that Prime Minister Ardern had met with Prince Charles – the man who might be King. While the monarchy has strong support in both countries, it is fair to say that there is a considerable body of opinion on both sides of the Tasman Sea which favours a move towards a republic after HM The Queen eventually leaves the stage.

There seems to be two strands to republican sentiment. Firstly, there are those who believe that the monarchy – a British monarchy – represents the colonial past and that both countries need to express their identities by having one of their own nationals as head of state. The second strand is agnostic on the issue of a republic but is not comfortable with the Prince of Wales. Some think that Prince Charles does not resonate with the Aussie and Kiwi public – and that Prince William would be a more popular sovereign. Others – the social conservatives who still wield influence despite recent social reforms like same-sex marriage – will never forgive the Prince of Wales for the dissolution of his marriage with Lady Diana…

That said the Prince’s visit to Queensland and the Northern Territory to open and then follow the Commonwealth Games in April was deemed a great success by the Australian media. Nevertheless, there is a deep-seated notion amongst many in both countries that they will never be truly independent nations until such time as they have one of their own as head of state. My best guess is that, come the day, the parliaments of both countries will proclaim Prince Charles king – though with loud dissenting voices. There will then be referenda on the issue of the monarchy – which will be finely balanced.

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While the monarchy is a potent symbol of Australia’s and New Zealand’s umbilical link to the Mother Country, the strategic alliances they maintain are more important than any symbol. In London at the Commonwealth Heads of Government Conference (CHOGM) in April, UK Foreign Secretary Boris Johnson and NZ Foreign Minister Winston Peters pledged closer cooperation in the Pacific region. Britain and New Zealand will co-host a forum on climate change in the Pacific in December at Wilton Park.

At the end of the day, the Five Eyes Agreement on intelligence sharing (between the UK, the USA, Canada, Australia and New Zealand) is de facto the most effective military alliance in the world. On 20 April the NZ Prime Minster, Jacinda Ardern, told the Five Eyes that New Zealand had been hacked by Russia. One is tempted to say: We are all in this together.

Australians will tell you that the war in the Pacific during WWII was won by the Americans and that they still look to America for ultimate protection, rather than to Britain. Indeed, Britain’s military presence in the Pacific is now negligible. In a more uncertain world, however, the combined military resources of the CANZUK (Canada, Australia, New Zealand and the UK) powers would be formidable. I expect this to climb to the top of the agenda once the current fog surrounding the Brexit negotiations dissolves, as eventually it must. In ten years’ time, Australia and New Zealand will loom larger in our strategic thinking than they do now. And they will be more important destinations for our investment capital.

God defend New Zealand!

When New Zealanders sing their national anthem, they pray for God to defend their island nation knowing that their last line of defence is not their armed forces, which are small, but their extraordinary isolation. Who would want to invade New Zealand? a Kiwi friend asked me.

New Zealanders harbour a fierce competitiveness with Australia – expressed in the ferocious rivalry between the two nations’ rugby and cricket teams – because they know that Australia has been endowed with greater blessings by Mother Nature; and yet they have been able to construct a nation of parallel prosperity and quality of life. New Zealand’s strengths are numerous, not least its fertile land and its industrious people; but its greatest weakness is that it is too small. Small nations, which lack economies of scale, tend to be less efficient – and therefore less prosperous – than large ones. That said there are many examples of small nations which have become rich by building up their competitive advantages – think of Switzerland.


The choices that New Zealand makes over the next ten years will set the country’s future course for the next century and more. New Zealand needs to establish enduring partnerships with larger nations and groupings, which is why the TPP is considered a no-brainer there. But New Zealand, which is rightly proud of its multi-ethnic character, also needs to decide whether it wishes to remain an English-speaking nation or one largely speaking Mandarin. Time will tell.

Advance, Australia Fair!

You will never meet an Aussie who would not wish to be anything other than Australian – even if the Australians are inveterate travellers, especially when young. Those who spend time working abroad, not least in the UK, normally return in time. The notion that the country is blessed by nature and that it is a country where hard work pays off is implicit in the lyrics of Australia’s national anthem. Unrestricted by the social attitudes of the Old World, endowed with the abundant resources of a huge and vibrant young nation, Australians possess the sense of possibility of the Americans, but without their deep anxieties.

Australians all let us rejoice
For we are young and free
We’ve golden soil and wealth for toil
Our home is girt by sea.

Action

There are a wide number of equity opportunities for clever stock pickers on the Australian stock market; the New Zealand market, however, is smaller, less liquid and more volatile. That said there are numerous NZ stocks worth following, as described above, though many are listed on the Australian market. Since nearly all Australian large cap stocks are heavily invested in New Zealand, the best way to get exposure to these two growing economies is via a diversified Australian equity fund.

TheEllerston Australian Market Neutral Fund is of interest to sophisticated investors but, unfortunately, is currently closed to new subscriptions. Australian equity funds delivered an average return of 12.9 percent in calendar 2017, while the S&P-ASX 300 index returned 11.9 percent over the year, according to the Morningstar Australian Institutional Sector Survey.

Most major London-based investment houses offer Australian funds but amongst locally-domiciled funds some of the star performers over the year have been Platypus Australian Equities Fund and Bennelong Concentrated Australian Equities Fund – which delivered returns of 24.2 percent and 30.8 per cent respectively in 2017.

The team at Platypus applies quantitative screens and fundamentals as the main drivers of its strategy, which results in a punchy portfolio of 20-40 stocks, according to Morningstar.


[i]Figures from Wikipedia, accessed 17 May 2016.

[ii]According to The Financial Review Rich List 2017 he is Australia’s fourth richest man.

[iii]Reported in The New Zealand Herald, B2, 13 April 2018.

[iv]See: https://www.stuff.co.nz/business/property/85164931/hotels–who-are-the-biggest-players

[v]Aviation workers waiting for takeoff, by Andrea Fox, Weekend Herald, page C5, 14 April 2018.

Comments (4)

  • Tony Airey says:

    Am I suffering from deja vu or have I read this before?

  • Lawman says:

    An informative article.

    It is not the geographic remoteness that matters: trading and research are done on the Internet. Rather my non involvement to date has been because I do not understand the Australian/ New Zealand markets, collectives and their history. In principle I should be able to overcome this with some hard work. Any suggestions welcome.

  • Victor Hill says:

    This is re-printed from the MI magazine, Tony, which is what we normally do with the lead feature. You may have read it there. Victor

  • Victor Hill says:

    Lawman – in my opinion the best possible type of research is to get on an aeroplane and fly there – you will also find Australia & NZ very congenial in so many ways. Victor

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