Sweetman said that the motivation for investors to include New Zealand equities in their portfolio: strong dividend yields and a relatively stable business and political environment – are unchanged.
New Zealand’s swift and effective containment of the virus (so far) and the government’s willingness to provide fiscal stimulus, as demonstrated by yesterday’s announcement of a $50 billion COVID-19 Recovery and Rebuild Fund, means New Zealand could be back in business faster than many other countries, said Sweetman.
“Apart from an initial plunge, the New Zealand sharemarket has stayed strong throughout the course of the pandemic to date,” he said.
“Investors, including the many overseas investors that have come into the market in recent years, seem to be looking through the factors that would otherwise generate considerable volatility – perhaps recognising that New Zealand remains much better placed than many other countries,” said Sweetman.
However, Sweetman said that while the government has put in place the necessary support to minimise short-term economic pain and enable recovery, long-term sustainable economic growth required to support a rebuilding will need to be provided by the private sector.
“The government has been right to focus on jobs – as the Prime Minister said the other day, employment provides people with a foundation: it does the same thing for the economy as a whole,” said Sweetman.
“Over the long-term, though, it will be up to the private sector to drive growth.
The best way to reduce the debt/GDP ratio is to increase GDP, and that is where the private sector, supported by effective capital markets, comes into play.”
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