Forum Archive Index - December 1999

["Mark Hubbard" <mhubbard@es.co.nz>]

The following are obviously my personal opinions.

After the first two days of Parliament sitting it is now evident that the
govt. is far more left than centre - ie, far more anti business (only a few
days after the election Clark was bagging the salaries paid to executives in
NZ bigger public companies in the CHCH Press). One particularly worrying
aspect, other than the idiocy of renationalising ACC, is the news that
Cullen is now looking at the corporate (and trustee) tax rate (ie, he's
finally woken up to the fact that the 39% tax rate will be avoided (and
quite rightfully so)). This bodes very badly I feel for the NZSE, coming as
it does on the same day that Germany has announced that it will be lowering
its corporate tax rate to 25%, and also given the OECD trend toward lowering
taxation rates due to the  many studies now that demonstrate that higher
taxes diminish savings and growth, and cause business to become less
competitive.

NZ now has a lot higher taxation, overall including the indirect taxes,
than, I suspect, virturally all of its major export markets - given this our
export companies are going to become uncompetitive and will struggle as much
as those with domestic markets (which in my opinion will ultimately be
stifled in the vice of regulation). (The exporters one boon may be the $NZ
going south as overseas investors wake up to what is going on here - but
this will not make up for the increasingly anti competitive environment that
will be created here through higher taxes and procedual regulation).

I personally believe that the much higher political/economic risks that are
quickly becoming evident have not been factored into the NZ stock market.

For these reasons I personally have started considerably re-weighting my
investment portfolio. Pre election I had a policy of 40% to 50% of my
portofolio being outside NZ (across all asset categories, fixed interest,
property, equities, + a small portion of currency and commodity trading
funds) - I may now look to up to 70% to 75% being invested in overseas
markets - mainly through UK Investment Trusts. The already mentioned likely
fall to occur in the $NZ over the next three years alone would make this
look attractive.

With regard to the money I do leave here, it is hard to think of what public
company investments to keep. The two logical ones are Restaurant Brands and
Warehouse, although even the Warehouse could have trouble if tarrifs start
to be strengthened/reintroduced - and given the last two days, all bets are
off. I will also of course keep my investment in Fernz which has very little
NZ exposure, and Ryman has done so well for myself, that I may well keep it
also.

Anyway, I would be interested in other people's picks of 'safe harbour' NZ
companies, as well as NZ vs Overseas portfolio weightings.

[Ben, I apologise for the political nature of this posting, however, I do
believe that the issue of political risk has come to the forefront of
sharemarket investment here now. If you do not want this topic discussed,
then it's your forum so I'm sure you'll let us know. Regards]




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