Forum Archive Index - May 2000

[ril <ril99_99@yahoo.co.uk>]

After reading today's Herald site.

There was a time very recently when a trade deficit (visibles) had never
occurred. Now it is running at $3.5 bn for the Feb year. This is an
extraordinary figure. March is the time for export resurgance and this
was also blown away by a bigger increase in imports.

These are significant figures. Comrade Brash will raise interest rates
even higher this month to try and hold up the Kiwi ruble and stop the
importing of inflation. 

Most economists were predicting recently that the Kiwi would reach 53 -
55 cents this year. No way.

Brash will keep hiking rates and mortgages will hit 10% late this year
is my guess.

However, the writing is on the wall for the Kiwi and the interest rate
rises will choke off equities some more. His theory is also that demand
for imports will fall if interest rates rise but this has not been the
case so far. In my opinion this will only happen when the dollar falls.

At some point Brash is going to have to stop raising or lower rates and
the Kiwi ruble will take a pounding. Offshore fund managers should be
coming to the same conclusion about now. They will be thinking, hey if
the ruble drops 10% I have to make 20% back on the NZ equities to get a
decent return to my investors. Knowing that the chances of making such a
return in NZ equities or bonds is about the same as a decent ski season
on Ruapehu, they will yank their dough out.

This will depress the local sharemarket even further IMHO.

It is looking really bad for the balance of payments/ current account.
It's going to be a shocker this year. Mexico style.

What should an intelligent investor do? Aussie or American government
bonds. Why? Protection for currency risk and corporate bonds are going
to get hit in the stockmarket crash. 

Also, with all these big companies doing a runner to Sydney there will
be more shareholders there in time and a higher dividend stream heading
over the Tas (or remaining over the Tas).

Like to offer some good news but can't except every time the ruble falls
I get a payrise.

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