New Zealand's stocks and currency face a test as a tight general election raises the prospect of drawn-out coalition talks and uncertainty over the next government's policy agenda. The benchmark S&P/NZX 50 Total Return Index has lost momentum after hitting a record high in August, as investors turn cautious ahead of the Nov. 7 election. Recent polls show the National Party and Labour Party exchanging razor-thin leads, both below 30%, so smaller parties may prove pivotal in coalition talks. Meanwhile, the New Zealand dollar has slid around 6% against the greenback since late August.
Energy policy is a key focus. NZ First and the Greens want to break up the so-called gentailers, which operate generation plants and sell power to consumers, and the Greens also propose a new publicly owned energy company. Those proposals may weigh on Contact Energy Ltd., Meridian Energy Ltd., Genesis Energy Ltd. and Mercury NZ Ltd. Labour's plan to require data centers to support new generation could benefit the gentailers, while Infratil Ltd. may face pressure from a Greens proposal to pause new data-center consents for a year, according to a UBS Group AG note.
Housing is another flashpoint. Labour proposes a 28% capital-gains tax on investment property, which could weigh on Fletcher Building Ltd. and Precinct Properties Group, and add pressure on retirement-village operators Ryman Healthcare Ltd. and Summerset Group Holdings Ltd. Healthcare stocks may gain from increased spending proposed by parties on the left. EBOS Group Ltd. could benefit from higher funding, and Fisher & Paykel Healthcare Corp. may also be in focus.
As Generate Investment Management's Greg Smith put it, markets generally price policy well once it is known, but prolonged uncertainty is harder to absorb.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing