Latest / Best of Business / Jeremy Hutton: Milford Asset Management expert on the election's impact on the NZX

Transcript

Jeremy Hutton: Milford Asset Management expert on the election's impact on the NZX · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
• 0:13
  Speaker 1: and our wide range of podcasts now on iHeartRadio. Jeremy Hutton,
• 0:17
  Speaker 1: Mulford Asset Management, is with us. Hello, Jeremy.
• 0:20
  Speaker 2: Good evening, Heather.
• 0:21
  Speaker 1: Now, this campaign has really affected the retirement sector on
• 0:25
  Speaker 1: the NZX. What's been the key issues here?
• 0:28
  Speaker 2: Yeah, no doubt it's been a rough run for the sector,
• 0:30
  Speaker 2: particularly on the share price front. I mean, so far
• 0:34
  Speaker 2: in 2026, we've got Ryman Healthcare down 38%. and Somerset
• 0:39
  Speaker 2: down a whopping 46%. But firstly, earlier in the year,
• 0:44
  Speaker 2: we have had a much weaker than expected housing market,
• 0:49
  Speaker 2: and we know the sector is relatively sensitive to that.
• 0:51
  Speaker 2: And then the Iran conflict hasn't helped with confidence either
• 0:55
  Speaker 2: in the housing market. And then also leading into much
• 0:58
  Speaker 2: higher interest rates, that's a headwind. And the sector has
• 1:02
  Speaker 2: reduced its debt levels quite a bit over the past
• 1:04
  Speaker 2: few years, but they still have some large debt balances
• 1:07
  Speaker 2: and and that does impact their cash flows. And then thirdly,
• 1:10
  Speaker 2: the last leg down more recently, the sector has been
• 1:13
  Speaker 2: getting a lot of attention politically in this campaign, and
• 1:16
  Speaker 2: some of the policies proposed are quite penal. So unfortunately,
• 1:20
  Speaker 2: the sector remains pretty out of favour with investors at
• 1:22
  Speaker 2: the moment.
• 1:23
  Speaker 1: What's behind the sell-off? What are the policies that are
• 1:25
  Speaker 1: weighing on it?
• 1:28
  Speaker 2: Yeah, I mean, two things. The soft housing market, as
• 1:30
  Speaker 2: we discussed, I mean, we had some further Real Estate
• 1:33
  Speaker 2: Institute data out for September and unfortunately another poor showing.
• 1:39
  Speaker 2: But on the policy front, I mean, it's really been
• 1:41
  Speaker 2: the rise of the Opportunities Party giving that centre-left block
• 1:45
  Speaker 2: a really good shot at this election. And so the
• 1:48
  Speaker 2: Labour Party's policies on retirement are getting a lot of
• 1:51
  Speaker 2: attention and unfortunately they are negative for the sector. And
• 1:55
  Speaker 2: most impactful has been the proposed repayment timeframes for an
• 1:59
  Speaker 2: outgoing resident, and they want to shorten that period. And
• 2:03
  Speaker 2: that's going to increase debt balances a lot for operators
• 2:05
  Speaker 2: in the sector. And then a few other things slightly
• 2:08
  Speaker 2: more indirectly is the capital gains tax on investment property
• 2:12
  Speaker 2: and potential weakness, continued weakness for the housing market there.
• 2:16
  Speaker 2: And then the pay equity scheme as well could weigh
• 2:19
  Speaker 2: on sector earnings. So, yep, a lot of policies to
• 2:23
  Speaker 2: digest for the sector as well.
• 2:24
  Speaker 1: Yeah, outside of the election, what are the next catalysts
• 2:26
  Speaker 1: that you think we need to be looking at?
• 2:30
  Speaker 2: Well, sort of interesting, Ryman and Somerset both reported their
• 2:33
  Speaker 2: quarterly sales numbers this week, and they were actually very strong.
• 2:37
  Speaker 2: So that sort of defies expectations from what we're hearing
• 2:40
  Speaker 2: on the underlying housing market. And sort of implies operationally
• 2:44
  Speaker 2: they're performing pretty well. I mean, if we do get
• 2:47
  Speaker 2: a centre-right strong showing at the election, that would definitely
• 2:51
  Speaker 2: be a positive. And then global interest rates, I mean,
• 2:53
  Speaker 2: they have been increasing a lot pretty rapidly. And the
• 2:56
  Speaker 2: US midterms could have a big impact on this, especially
• 3:00
  Speaker 2: on the policy on Iran going forward. We'll see what
• 3:02
  Speaker 2: impact that could have on global interest rates. And then finally,
• 3:06
  Speaker 2: I mean, we might have to wait until 2027, but
• 3:09
  Speaker 2: any life in the local housing market, particularly in Auckland,
• 3:12
  Speaker 2: will help the sector materially as well. So all in all,
• 3:15
  Speaker 2: still quite a bit of political and market volatility that
• 3:18
  Speaker 2: the sector's got to worry about.
• 3:20
  Speaker 1: Hey, thank you very much, Jeremy. As always, it's good
• 3:22
  Speaker 1: to talk to you. Jeremy Hutton, Milford Asset Management.