A Scoop Of Market Confidence, Consumer Spending And Travel Bubble

Friday, 8 May 2020, 4:07 pm
Press Release: Kalkine

New Zealand has been grabbing international headlines with only two fresh novel coronavirus cases reported this week and apparently no undetected community transmission. The nation is set to enter the more relaxed alert Level-2, following the Cabinet meeting scheduled to review alert level decisions on 11 May 2020.

With the death toll remaining at 21, the number of confirmed cases currently stands at 1,139, while 1,332 have recovered so far.

Flattening, perhaps crushing of COVID-19 curve in New Zealand is setting the stage for robust financial stabilisation backed by dedicated Government initiatives and Central Bank’s robust monetary stance, offering a strong competitive advantage to economy to rebuild itself.

Meanwhile, spirited business efforts and growing popularity of digital platforms are innovatively carving out new paths for economic revival.

Microsoft’s latest proposal of investment in NZ’s digital infrastructure to launch its first data-centre marks its maiden step towards providing local access to enterprise-grade cloud services, validating outstanding spirit of nation’s innovation.

Prime Minister Jacinda Arden quoted on Wednesday: ‘New Zealand’s success in curbing the coronavirus has given it a “safe haven” advantage, allowing the country to be open for investment.’

She further stressed NZ’s efficient approach to tackling the health crisis further underpinning the nation’s brand as high-grade, sound and safe place to invest in.

Backed by strong virus containment, prospective ‘travel bubble’ discussions between Australia and New Zealand have further rekindled hopes for trade, travel and tourism space. Prime Minister Jacinda Arden joined Australia’s emergency cabinet meeting on 5 May 2020 for discussing the possibility of opening borders as a part of the ‘trans-Tasman Covid-safe travel zone’ proposal allowing virus-safe two-way travel between countries.

Market Confidence Extended

S&P reaffirmed New Zealand’s AA Rating with a positive outlook while indicating that the situation would improve as the pandemic subsides. Besides, revamped business strategies along with calculated Government moves seem to foster optimism in the market scenario.

S&P NZX 50 settled at 10,573 points on Wednesday, up 0.78 percent. Pushpay Holdings (NZX:PPH) and Smartpay (NZX:SPY) joined the rally with a gain of 20.88 percent and 1.30 percent, respectively.

Meanwhile, the market seems to have extended April gains with Consumer Staples, Health Care, and Financial Services Sector Index posting a positive return on month-to-date (MTD) basis as on 6 May 2020.

• S&P/NZX All Consumer Staples Index was up 0.87 percent MTD to 6,489.02.
• S&P/NZX All Health Care Index gained 2.84 percent to 2,342.43 on MTD basis.
• S&P/NZX All Financials Index was up 0.3 percent MTD to 707.314 points.

Looking at real estate space, it was noted that ASX-listed fund manager Centuria Capital has finally agreed to acquire up to 25 percent of stake in leading real estate fund manager Augusta Capital (NZX: AUG) in New Zealand. It comes after Centuria initially withdrawing the offer in March due to high market volatility led by the coronavirus outbreak. Centuria has decided to take out of its cash reserves a maximum of NZ$23.6 million in order to invest in Augusta Capital, which it believes is a unique opportunity to develop a strong presence in New Zealand.

On the other hand, Chinese gaming and social media giant Tencent’s investment in Afterpay (NZX:APT) has amplified investor confidence in fintech products that are boosting online sales across the country.

Consumers’ Confidence Increases for Fifth Straight Week

Economic reopening along with the Government stimulus is broadly directed at the free flow of cash in New Zealand market. ANZ-ROY Morgan Australian Consumer Confidence gained further 5.3 percent, up for the five weeks straight.

The increase in confidence over last week is majorly attributable to further easing of virus-induced lockdown restrictions and optimism building around no new daily cases, said David Plank, ANZ Head of Australian Economics.

Stockpiling of essential goods during the lockdown continued to drive market momentum as S&P Consumer Staple index rose by 14.56 percent and 22.39 percent on Quarter-to-Date (QTD) and Year-to-Date (YTD) basis, respectively, as at 6 May 2020.

Meanwhile, the nation has witnessed piqued online alcohol sales while overall online retail sales were up by around 350 percent as per Retail NZ.

The trade, for the time being, is reportedly aimed to be localised with e-commerce integration eyed to remain the primary driving force for consumer spending as New Zealand gradually reboots its operations.

Potential Recovery Prospects Budding for Travel Industry

While travel and tourism industry is grappling with grave health and financial crisis, the NZ travel space is witnessing some momentum these days. Trans-Tasman travel bubble could come as a substantive relief for the beaten-down travel sector of Australia and New Zealand in the near term.

In the optimism building around the travel space, global surf brand Kathmandu Holdings (NZX: KMD) is planning to reopen its Australian stores while many of its New Zealand stores are already back in operations. Subsequently, KMD stock price rose by 9.64 percent on 6 May 2020.

On a related note, Napier’s Council-owned Kennedy Part Resort has further strengthened its position to continue to provide high-quality accommodation as hopes of domestic tourism recovery emerged with strong future growth.

Notably, Tourism Holdings (NZX: THL) witnessed more than 8% rise in its stock price during its early trade on 7 May 2020.

Adding to odds of getting through the pandemic without the Government intervention, some companies are aiming to stay afloat backed by varied innovative measures. Boeing was recently in news for raising USD 25 billion after huge bond sale.

With virus spread under control, New Zealand’s COVID-19 success story continues to grab attention backed by increased consumers’ confidence, strategic business survival and bounced back market momentum. With hopes of less-intense travel restrictions with neighbours, upcoming Cabinet meeting remains the key to gauge further path to recovery.

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