Forum Archive Index - May 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

 

Readers: The previous installments were dated April 16,15 and 14, 2001.

 

H: We don't have a compulsary superannuation system and this reduces the will to save.

 

G: How about a summary of findings?

 

H: Yes: Top management often lack the skills to operate large international companies. In addition, taking over overseas companies has not often been successful. 

 

As a  consequence, a lot of NZ's wealth has either been destroyed or has not been able to grow. Leaders suddenly become very active and are quickly trying to fix problems which could have been prevented in the first place. 

 

G: I find it difficult to invest in the small NZ market. The time will come when the few remaining brokers will recommend the same NZ shares!

 

H: Yes, companies are being taken over at a high rate! Where will the profits go?

 

The inflow and outflow of currency is carefully watched by the Government. The tendency will be to place a premium on interest rates, ie. government interest rates tend to be somewhat higher in normal conditions.

 

Fortunately, a lot more timber will become available shortly; if we can get good prices then the effect of increasing oil imports can be overcome!

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Many investors want to protect their assets by investing overseas: Markets are larger and there is more choice!  

And there is a chance of reducing the effects of a rising or falling NZ dollar!

 

G: Let us start with Australia. I read that the NZ dollar tends " to follow " the Aussie dollar: one would think that from a currency point of view, not too much money ought to be invested in Aussie shares? 

 

H: Sure, but the reduction of currency risk is not everything! It will have to be one of our investment destinations.

For a start, the country is up in the pecking order and it has much to offer. It imports skills at little cost and it can afford to be more selective.

 

They have magnificent research facilities and do support them! Their medical research is world class!

The savings from their superannuation systems will also be very significant before long!

 

The Woodside / Shell episode shows that the Aussies are not about to " give their valuable assets ", away!

The larger market can also sustain more and larger competitors.

 

The NAB 's " International Outlook " of May 2, 2001, shows GDP growth data from 1996 to 2000.The Aussie GDP growth is at least a third higher than that of NZ. 

 

NAB concludes that a general slowdown in activity is well under way in East Asia as " US and Japanese weakness feeds into this highly export - dependent region ".

 

Australia has a high exposure to Japan and the Far East sector. And we know that the economy is flat!

But their fast growing mining sector will support the country in difficult times!

 

Not so long ago our stock index was level with the one from Aussie; theirs is now nearly 60% higher! 

 

G: Come to think of it, the lower prices of some major NZ stocks would have made a difference in a small market!

 

These are our opinions.

 

Gerry

( To be cont.)