Latest / The SME Stream / Sam Trethewey: Milford Asset Management Portfolio Manager on the NZX potentially improving in 2025

Transcript

Sam Trethewey: Milford Asset Management Portfolio Manager on the NZX potentially improving in 2025 · The SME Stream

• 0:00
  Speaker 1: Let's talk about the n z X and I'm joined
• 0:02
  Speaker 1: by Sam Trathui and he's from Milford Asset Management.
• 0:05
  Speaker 2: Hell, it's Sam Evening Andrew.
• 0:08
  Speaker 1: So the market, the INS and X has been a
• 0:10
  Speaker 1: material underperformer, particularly when you're compared to major offs sure
• 0:15
  Speaker 1: share markets this year.
• 0:16
  Speaker 2: Why I think, Look, Firstly, it's still up ten percent
• 0:22
  Speaker 2: over the course of the year, which is not a
• 0:24
  Speaker 2: bad yes, and it's definitely what I call respectable, but
• 0:27
  Speaker 2: agree like, it's not the twenty five thirty percent that
• 0:29
  Speaker 2: we are seeing in major offshore share markets, the likes
• 0:32
  Speaker 2: of the S and P five hundred, et cetera. So
• 0:35
  Speaker 2: why hasn't kept up Really three key reasons. So firstly,
• 0:38
  Speaker 2: interest rates. The first half of this year, the stance
• 0:42
  Speaker 2: taken by the RBNZS was a really big head win
• 0:45
  Speaker 2: to the local market. It's pretty sensitive to tentist rates,
• 0:47
  Speaker 2: the dividing yields, et cetera. The attractives and attractiveness of
• 0:50
  Speaker 2: them as a big driver of performance. And it wasn't
• 0:54
  Speaker 2: untill that first cut that we saw from the RBNZ
• 0:56
  Speaker 2: in July that that pressure is. Secondly, corporate earnings have
• 1:01
  Speaker 2: been under pressure. That's what we all can see and
• 1:04
  Speaker 2: feel in the economy coming through and heading the market.
• 1:07
  Speaker 2: And then finally, if you look closely at the performance
• 1:09
  Speaker 2: of those major year markets offshore at the return, it's
• 1:12
  Speaker 2: really been driven by a handful of stocks. So take
• 1:15
  Speaker 2: the US for example, the Magnificent seven there led by
• 1:20
  Speaker 2: Navidio on the artificial official intelligence theme. That stock is
• 1:24
  Speaker 2: up one and eighty percent this year, so it's a
• 1:27
  Speaker 2: big part of the market. The inxt X does have
• 1:29
  Speaker 2: some winners Frish and Buckle Health get the largest stock
• 1:32
  Speaker 2: up sixty percent this year, but not to the same extent.
• 1:34
  Speaker 2: So three key differences there.
• 1:36
  Speaker 1: Andrew, Okay, so what about the year ahead.
• 1:40
  Speaker 2: I think, look, the headline really is that I'm probably
• 1:43
  Speaker 2: more optimistic about the outlook for the inxet X that
• 1:46
  Speaker 2: we than I have been some time. And that's really
• 1:49
  Speaker 2: since the pandemic. So where interistrates are heading the official
• 1:54
  Speaker 2: cash rate towards three percents, and the prospect of improving
• 1:57
  Speaker 2: economic conditions in the year and then therefore improving corporate
• 2:02
  Speaker 2: earnings really are the big drivers there. If you look
• 2:05
  Speaker 2: back at history pre the pandemic, when we're last cutting
• 2:09
  Speaker 2: intoest rates back and from say twenty fifteen to twenty twenty.
• 2:13
  Speaker 2: Back then we had the rockstar economy, but we also
• 2:15
  Speaker 2: had a rockstar share market, and that's when we saw
• 2:18
  Speaker 2: some pretty persistent, steady flow into the market looking for
• 2:21
  Speaker 2: better returns. Most of that was term deposits. So it
• 2:24
  Speaker 2: will be interesting to see as TV rates, as STEM
• 2:27
  Speaker 2: deposit rates come down, will that drive the share market
• 2:30
  Speaker 2: higher like it has in the past.
• 2:32
  Speaker 1: Well, we always said, you know, survive until twenty five,
• 2:35
  Speaker 1: but these days are saying, well, twenty five is still
• 2:37
  Speaker 1: going to be a grind. Let's get to twenty six.
• 2:39
  Speaker 1: Would you agree with that?
• 2:41
  Speaker 2: I think, well, the test is and what we're not
• 2:43
  Speaker 2: seeing yet is if the interest rate cuts that are
• 2:47
  Speaker 2: coming through from the Reserve Bank when they do, actually
• 2:50
  Speaker 2: start to start to influence the local economy. And that's
• 2:54
  Speaker 2: what we really need to see, and I think people
• 2:56
  Speaker 2: are hopeful of it at the stage. But twenty six
• 2:59
  Speaker 2: to point certainly looks a lot easier and a lot
• 3:02
  Speaker 2: better set up than twenty five.
• 3:04
  Speaker 1: And does the nz X does do you Zealand need
• 3:06
  Speaker 1: a hero stock like in the video? And before we
• 3:08
  Speaker 1: go too much about in video, so the SMP says
• 3:10
  Speaker 1: that AAI might be being a little bit over hyped
• 3:13
  Speaker 1: in America, but still there's a hero stock there. Do
• 3:15
  Speaker 1: we really need one of those to make our markets perform?
• 3:19
  Speaker 2: I think it. Look it certainly was the biggest story,
• 3:22
  Speaker 2: the biggest thematic of twenty twenty four, and I expect
• 3:24
  Speaker 2: that to evolve in the video to the aartmatic and
• 3:27
  Speaker 2: Nvidia to evolve into the next test stage over the
• 3:31
  Speaker 2: yearhead so maybe it's into software companies that benefit from
• 3:34
  Speaker 2: that AI tech to new point around how long it
• 3:38
  Speaker 2: can last. But locally we have had these stocks before.
• 3:42
  Speaker 2: At Milk for instance, dominated the market a while ago,
• 3:46
  Speaker 2: and you know, sure it does help performance, but I
• 3:48
  Speaker 2: think the biggest drivers that interest rate setup and where
• 3:52
  Speaker 2: the economic conditions he had, So certainly if they do improve,
• 3:56
  Speaker 2: it is a very good prospect for your head.
• 4:00
  Speaker 1: Thank you so much, Merry Christmas. Same tra theory from
• 4:03
  Speaker 1: Milford Essett Management