Transformation Theories Branching Out From Coronavirus-Led Crisis - NZ Businesses And Equities

Thursday, 30 April 2020, 5:59 pm
Press Release: Kalkine

Demonstrating the world that there is always a light at the end of the tunnel, New Zealand onsets the gradual exit from coronavirus lockdown. The country has now stepped down to Alert Level-3 that eases lockdown restrictions, with people now able to travel to work, schools resuming classes and businesses coming back in action after four weeks of stringent lockdown at Level-4.

Prime Minister Jacinda Ardern stated that ‘Community transmission of the virus had ceased in New Zealand. We (New Zealand) have won that battle.’

Although, Ardern warned that isolated cases would continue to emerge and there is no certainty about the complete elimination of all transmission, allowing a return to normal life.

On a positive note, the gradually receding medical crisis seems to have changed the perspectives of several market players, springing in hopes in the fight against the pandemic. With Government’s early lockdown decision, New Zealand now reports one of the lowest tallies in the world with total 1,474 confirmed coronavirus cases and 19 deaths as on Wednesday, 29 April 2020.

Go three months back in time and you will be amazed to see the transformational theories materialising across the business and equity landscape amidst efforts to stay afloat amidst the virus-induced economic downturn.

Let’s have a look at how this crisis has mushroomed a radical shift in the business models and equity market that is expected to further integrate resilience into the stronger economy over the near term.

Transformational Theories Across Business Realm

Digital Adoption Centric to Organisations 

The tech-based transformations using the digital infrastructure remained the key to sustain the remote business operations across the New Zealand.

Covid-19 has set forth the new trend of fabricated technology and work paradigm which is expected to further advance even post the pandemic control, aiding businesses in their cost cutting drives and sustainability initiatives.

Integration of Business Continuity Plans

Many businesses found themselves in an apparently tough situation during the unprecedented medical emergency with no risk-optimisation insights and contingency plans, battling to adopt strategic changes in short notice.

While they now struggle to sustain their market position, businesses may want to incorporate real-time flexible contingency and risk management plans to be better positioned to tackle such unprecedented events in the future.

Shift to E-Commerce

The social distancing norms and closure of the majority of the brick-and-mortar stores piqued the demand for e-commerce. Many businesses sensing the need of the hour incorporated e-commerce as an integral component of the supply chain.

The trending e-commerce element could be well embedded in future strategic initiatives for enhanced business performance and customer satisfaction.

Environmental Sustainability is the Future

The healing mother nature amidst worldwide lockdowns has demonstrated that the climatic conditions could improve in the absence of humans’ ecologically deteriorating activities.

The healing of environmental conditions has placed the opportunity of sustainable future, encouraging businesses to accelerate adoption of corporate social responsibility and operate with adherence to the environmental laws.

Cost Management

The black swan event induced crisis has led to a huge loss of revenues to the businesses, reflecting a pressing need for an efficient cost management system into business model. Cash burns with uncertainty hovering around the business environment has compelled the companies to cut down their fixed costs.

Adopting prudent cost management system, incorporating organisational restructuring with fewer workforce seem to define the near term business models of successful growth stories.

Transformational Theories In Equity Space

Investments in Gold

With financial markets going through the tumultuous ride, some investors seem to have parked their investments in the safe haven- Gold, Gold ETFS, or stocks of lucrative gold mining companies like New Talisman Gold Mines Limited (NZX: NTL).

The risk-averse psychological build-up during the time of crisis may also reflect in the future with high investment reliance on gold. However, it is imperative to take investment decisions considering fundamentals of the financial asset and dodging behavioral biases.

Focus on Growth driven Tech Stocks

The technological solutions helping different aspects of lives and aiding businesses to sail smooth during tough times have validated that the innovation seems to be a crucial saviour in the times of inconvenience.

While investors who acknowledge future sustainability of the tech-paradigm have parked their investments in the growth-driven tech stocks such as Pushpay Holdings Ltd (NZX:PPH), they need to secure longer term perspective while considering potential pockets of investment opportunities.

Portfolio Hedging and Diversification Trend 

Amidst the risk-averse sentiments, some investment moves seem to have been consistent with portfolio hedging and diversification as its integral elements.

While the inclination of the investors towards risk-containment may result in a boom in the financial derivatives market with the mutual funds’ popularity, market players need to preserve their chips and undertake prudent investment decisions.

The Popularity of Blue-Chip Stocks with Strong Fundamentals

Some rational investors are currently investing for the long haul while short term gains seem to be unpredictable. Notably, A2 Milk Company Ltd (NZX:A2M) and Fisher & Paykel Healthcare Corp Ltd (NZX:FPH) in the blue chip space seem to be in the investors’ watchlist currently.

The value investors may hunt for bargain in the popular blue-chip stocks having strong fundamentals, strengthened balanced sheet and decent cash flows to reap benefits in the long term.

Capital Market Infrastructure Evolution

The technology-based capital market infrastructure (CMI) has demonstrated strong resilience and adaptability amid the volatile situation.

The global exchange groups’ network may witness higher fintech involvement with the innovative solutions providing more efficiency and enhanced delivery of capital market services.

While adopting decisive risk and cost mitigation strategies, digitisation, e-commerce integration and green business practices seem to be driving business sustainability, market players in the equity space need to beef up/redesign portfolio considering their risk appetite and return expectations.

© Scoop Media