Latest / Best of Business / Jeremy Hutton: Milford Asset Management expert on the NZX dropping 1.53 percent amid Iran conflict

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Jeremy Hutton: Milford Asset Management expert on the NZX dropping 1.53 percent amid Iran conflict · Best of Business

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  Speaker 2: Now Jeremy Huton, Milford Asset Management is with us. Hi, Jeremy.
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  Speaker 3: Good evening, Heather.
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  Speaker 2: Now. INSIDEX has had a bit of a tough month, obviously,
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  Speaker 2: so have other markets around the globe. How has it
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  Speaker 2: been holding up?
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  Speaker 3: Yeah, it has been extremely choppy, in volatile month and
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  Speaker 3: financial markets and everyone's sort of trying to guess the
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  Speaker 3: next news flow coming out around the world. But yeah,
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  Speaker 3: insid X, it's down six percent so far in March.
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  Speaker 3: That I would add today it had a really good
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  Speaker 3: bounce back on some of that leaked ceasefire report, so
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  Speaker 3: it has been actually done a lot more than that
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  Speaker 3: six percent. But you have been slightly more insulated than
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  Speaker 3: our peer markets and in the Australian market down over
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  Speaker 3: seven percent, European and Asian markets down between eight and ten,
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  Speaker 3: so they've been hit relatively harder. And the US markets,
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  Speaker 3: of course have been a little bit more insulated, down
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  Speaker 3: only three or four percent. It does makes sense, you know,
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  Speaker 3: the US, they've got the energy independence, so they are
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  Speaker 3: a little bit more insulated, and I suppose we don't
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  Speaker 3: have any really direct, massive direct exposure to the Middle East,
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  Speaker 3: but you know there are a few second order effects
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  Speaker 3: und to come through that are worth touching on for
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  Speaker 3: New Zealand.
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  Speaker 2: Yeah, those second order effects, they I mean, they have
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  Speaker 2: the potential to halt ourg fragile economic recovery, don't they.
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  Speaker 3: Yeah, that's right, and it hasn't come at a great
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  Speaker 3: time for our economic recovery. I mean, we've obviously been
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  Speaker 3: trying to get off the canvas after a tough few years,
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  Speaker 3: and you know there has been a bit of a
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  Speaker 3: downturn and sentiment, I mean obviously driven by this oil
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  Speaker 3: price spike. It is another tax or another cost and
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  Speaker 3: post on New Zealand consumers and businesses. And obviously the
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  Speaker 3: next effect is that short term inflation and are we
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  Speaker 3: going to get increased prices? Will it lower growth? And
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  Speaker 3: could it lower earnings for companies? So potentially a bit
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  Speaker 3: of a nasty stakeflation or environment that markets or financial
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  Speaker 3: markets really don't like, and in fact no one really
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  Speaker 3: likes it all.
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  Speaker 2: How are you seeing the situation through the different sectors
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  Speaker 2: on the inseet ex this month?
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  Speaker 3: Yeah, firstly, you know the hardest hit sectors being tourism
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  Speaker 3: and travel adjacent businesses, So companies like in New Zealand,
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  Speaker 3: Tourism Holdings and Circo. I mean, they're all understandable given
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  Speaker 3: just some of the travel disruption we're seeing around the globe,
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  Speaker 3: and all of those shares or off a considerable over
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  Speaker 3: twenty percent this month. And then companies that use a
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  Speaker 3: lot of fuel as well, so Courier Business Freightways and
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  Speaker 3: their main freight two they're both down over double digits.
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  Speaker 3: So yes, those companies are really at the pointy end
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  Speaker 3: of the fuel crisis at the moment.
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  Speaker 2: And look, do you think that the higher short term
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  Speaker 2: interest rates from the oil inflation are affecting us as well?
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  Speaker 3: Yeah, this is some of the second order effects that
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  Speaker 3: potentially can come through with those higher short term rates
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  Speaker 3: and oil inflation. I mean, we're seeing some of the
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  Speaker 3: cyclical stocks in our economy, which we're anticipating a bit
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  Speaker 3: of a rebound this year, getting hit. Building materials companies
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  Speaker 3: like Vulcan Steel and Fletcher Building. Investors are thinking, you know,
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  Speaker 3: maybe the construction market might slow down a little bit.
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  Speaker 3: Retirement sectors such as Ryman in Somerset, I'm in higher
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  Speaker 3: interest rates and they're good for the housing market. And
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  Speaker 3: then Catman dou I mean they announced today that they're
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  Speaker 3: going to perform a capital raise this week, so you know,
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  Speaker 3: I would expect a bit more weakness also in the
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  Speaker 3: retail sector, particularly if consumers are just spending a lot
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  Speaker 3: less money.
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  Speaker 2: Where have been the places to hide? Do you reckon
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  Speaker 2: in the New Zealand market?
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  Speaker 3: Yeah, Channel Infrastructure to know on surprise, given the given
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  Speaker 3: the media attention around them, they're our fuel input terminal.
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  Speaker 3: The financial markets are giving them a bit of a benefit.
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  Speaker 3: I mean they're thinking that potentially a bit more resilience
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  Speaker 3: and fuel storage will be coming in at that site
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  Speaker 3: post of this. And then Fonterra and Turner's Automotive. I
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  Speaker 3: mean they both upgraded their earnings forecast this week, so
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  Speaker 3: the market's put them in the green for the month.
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  Speaker 3: So you know, the market is still rewarding those companies
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  Speaker 3: that are putting some good earnings results through good stuff.
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  Speaker 2: Hey Jeremy, always good to talk to you, Jeremy Hutton,
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  Speaker 2: Milford Asset Management.
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