Chaotic election not necessarily bad news for investors

New Zealand’s political landscape may be turmultuous but fund managers are divided on how much of an impact it will have on the local markets.

Tuesday, August 22nd 2017, 6:00AM

by Susan Edmunds

Aon noted in its most recent market update that New Zealand share prices moved up 1% over July.

But it said political risk was increasing now that September’s election looked set to be a closer race than had previously been expected.

New Labour leader Jacinda Ardern’s success at closing the gap with National could lead to market volatility, it warned.

But Brian Gaynor, of Milford, said it was normal for markets to wobble around elections.

He said it should be expected that consumer spending and house price growth would ease and markets could hit volatility in the eight weeks before a vote.

People might stop making decisions if they were concerned about the potential impact of a party’s policy, such as Labour’s capital gains tax, he said.

“This is what happens every time. It’s nothing new.”

Christian Hawkesby, of Harbour, said political risk had proven internationally to have less of an impact on markets than was expected.

“Over the past year markets haven't been rattled in the way that people feared – with Brexit or the US elections.”

He said the only political policy that had made a big difference in the market over recent times had been Labour’s policy around power companies before the last election.

Individual policies could have sectoral impacts, he said, but there was unlikely to be a widespread effect.

He said New Zealand was also in a sound position because the political spectrum was relatively narrow and both Labour and National were centrist in their approach.

Both would deliver more fiscal stimulus, he said, and both believed in inflation targeting.

“There might be tweaks around the margin but there is nothing fundamental.”

Tags: equities funds management Harbour Asset Management investment Markets Milford Asset Management risk