Recession Risk Looms | Portfolio Changes 

8 December 2022

New Zealand Market Movers 

The New Zealand market (NZX 50 Index, -0.2%) inched down on Wednesday despite gains made by the big energy generators, including Meridian Energy (+2.0%), Genesis Energy (+0.8%), Manawa Energy (+0.6%), and Mercury NZ (+0.4%). 

SkyCity Entertainment (-1.1%) announced yesterday that it will be facing civil penalty proceedings regarding allegations that its Adelaide casino breached Anti-Money Laundering regulations. 

NZ King Salmon (-8.5%) is also facing legal headwinds with the McGuinness Institute and The Department of Conservation both filing appeals to challenge the company’s consent to develop its open ocean farm. 

Air NZ (-0.7%) fell on the day after fuel-supply emerged at Marsden Point Refinery and airlines were warned to start rationing their jet fuel stock until at least 18 December. Auckland International Airport (-0.5%) and Tourism Holdings (-2.5%) were also hit by the news. 

Australia Market Movers 

The Australian market (ASX 200 Index, -0.9%) dropped on Wednesday after the country’s GDP growth rate slightly missed expectations, coming in at 0.6% in the September quarter (vs. 0.7% expected) and 5.9% for the year. 

The Reserve Bank of Australia’s rate hike on Tuesday is still impacting the rate-sensitive Technology (-3.3%) sector, which was the worst performer on the day. 

Elsewhere, Goldman Sachs tipped copper prices to hit record prices next year if demand outstrips a looming supply shortage. 

Europe Market Movers  

European markets (Stoxx 600 Index, -0.6%) followed global sentiment and closed in the red on Wednesday. Oil and Gas (2.0%) lead losses, followed closely by Mining (-1.7%), while Health Care (+0.7%) advanced. 

US Market Movers 

US markets (S&P 500 Index -0.2%) dipped on Wednesday as hopes for a less restrictive US Federal Reserve fade, and fears rising that the markets have peaked ahead of the all-but-guaranteed recession.  

Investors are now waiting for economic data this week for clues on what to expect from the Fed. Jobless claims data is due on Friday, followed by the Producer Price Index and consumer sentiment on Saturday. 

Portfolio Changes: 

We would like to increase our cash position slighlty heading into 2023 maintaining some dry powder, where we see the full impact of this years rate hikes play out as we beleive there is still further voltilility left in the market over the near-term. We would prefer to be more patient and see how this plays out, deploying fresh funds patiently and cautiously over 2023. 

In the New Zealand portfolio, lowering A2 Milk from 4% down to 3% given limited upside and trading at 14-month highs.  

With Pushpay’s takeover occuring early next year, we plan to allocate those funds to cash once it occurs, increasing our cash allocation in the New Zealand portfolio from 10% to 16%, the aim to then gradually invest the funds over 2023. 

In the Australian portfolio, we lower Telstra from 8% down to 6% – again with the stock trading near 6-year highs an opportune time to take some profit off the table, the funds allocated to cash increasing it from 12% to 14% in our Australian Portfolio. 

What Markets will be Watching this Week (UTC +13) 

EA ECB President Christine Lagarde Speech 

US Factory Orders MoM OCT  

AU RBA Interest Rate Decision 

NZ Global Dairy Trade Price Index  

AU GDP Growth Rate YoY 

AU RBA Bradley Jones Speech 

NZ Electronic Retail Card Spending YoY NOV 

US Producer Price Index MoM NOV 

The New Zealand market (NZX 50 Index, -0.2%) inched down on Wednesday despite gains made by the big energy generators, including Meridian Energy (+2.0%), Genesis Energy (+0.8%), Manawa Energy (+0.6%), and Mercury NZ (+0.4%). 

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