Here's my summary of the key events over the weekend that affect New Zealand, with news Zespri is planning to grow kiwifruit in China.
But first in China, their debt-to-GDP ratio rose to an eye-watering 237% in the first quarter of 2016. They may have GDP growing at +6.9% but they have had debt levels growing at over twice the growth in GDP in every quarter except two since 2009. The cumulative impact of that divergence has brought an unsustainable imbalance. It is more volatile because unlike other countries where sovereign debt underscore their imbalance, in China's case it is corporate debt that is their Achilles heel.
Emerging markets can affect us. Troubled Malaysian government investment fund 1Malaysia Development Bhd. must make a US$50 mln payment on a US$1.75 bln loan later today as it faces the possibility of a default that could trigger defaults on billions more of its debt. The ripples could get very bumpy.
The Panama Papers fallout is drawing the EU closer to establishing its own black list of tax havens. There already is a list of 31 by the OECD but it looks like additional countries may be in the EU sights. I wonder if it will include New Zealand.
In China, Zespri said it is considering growing kiwifruit in China as part of a plan to source it from local growers and ensure a year-round supply.
In Australia, their large (AU$117 bln) sovereign fund has turned bearish. they reportedly have close to 23% of the Fund's vaue in cash. The NZ Superfund (NZ$30 bln) is nowhere near as negative having less than 5% in cash.
In New York the benchmark UST 10yr yield is at 1.89%. Investors are bracing for a further rise in bond yields in a sign that views on the global economy have turned more optimistic following a run of better-than-expected data.
The oil price starts at just under US$44/barrel in the US, while Brent is now just over US$45/barrel. In fact, oil is now at a five-month high as falling US crude production provides more evidence that the market is rebalancing to permanently lower prices. By the end of 2016 this new price level will have washed through the economy and oil will not have the price drag we have seen for the past two years.
The gold price fell US$17 at the end of last week to US$1,232/oz.
In the rest of the world the NZ dollar will open at 68.5 US¢, at 88.9 AU¢, and at 61 euro cents. The TWI-5 index is now at 71.7 and now back in the middle of its 2016 range.
If you want to catch up with all the local changes on Friday, we have an update here.
The easiest place to stay up with event risk this week is by following our Economic Calendar here ».
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26 Comments
Speaking of debt, will 1 Million dollar mortgages place overall indebtedness into more risky territory for NZ?
http://www.stuff.co.nz/business/79129721/mortgage-millstone-gets-heavier
http://www.bloomberg.com/news/articles/2016-04-24/turnbull-bets-on-prop…
I see the Right in Aussie are keen on furthering the debt and house prices policy as they bleed votes, churning out the oh so familiar "Mum's and Dad's" line, it seems they truly do admire our current Government, especially their political catch phrases.
Brilliantly explained. http://topdocumentaryfilms.com/capitalism-marxism-socialism/
http://www.theguardian.com/books/2016/apr/15/neoliberalism-ideology-pro…
Only issue is he refers to the Left's failure to come up with an alternative. IMO it is we the people that must make the changes and come up with an alternative.
As I've said before there is no difference between the left and right they are both utopic and bound to fail because the utopia envisioned can never be achieved (an example of this is the health and safety legislation - not every hazard is foreseeable and in the end it comes down to individual responsibility - you can mitigate risk but you can't avoid it all together).
It is wrong to say there is no difference between the left and right. I am assuming you are referring to what might be regarded as the extreme right and left as parties like Labour and National are both centrist, possibly a little bit left if anything.
Both extreme left and right could be regarded as Utopian but the former is generally more internationalist and inclusive while the latter is more exclusive. Examples of the right are the Singapore, Taiwan and South Korea of not too many years ago. The most interesting and current example is China which is now more or less following in the footsteps of the Asian Tigers who were far from left and were practically dictatorships. Present day China is closer to the Chiang Kai-shek's vision of China than Mao's. It would have to be said that China's swing to the right has been spectacularly successful so far. The main difference between the classic lefts and rights is that the right tends to focus on linking the past with the future. China is very focused on its history now and Confucianism. Communist China tried to erase its past which was a huge mistake. In a sense the modern West is erasing its past too which is likely to be a huge mistake as well.
Nations should cherish their pasts otherwise they have no identity. This is actually Confucian. NZers may still have a bit of this as was reflected in the decision to keep the flag.
Yeah... Turnbull. Makes my skin crawl.
https://www.facebook.com/malcolmturnbull/videos/10154208649076579
The cumulative impact of that divergence has brought an unsustainable imbalance. It more volatile because unlike other countries where sovereign debt underscore their imbalance, in China's case it is corporate debt that is their Achilles heel.
In the case of the US it's not so simple to ascertain what the sovereign liability might be. Read GAO report. Link extracted from this article.
In New York the benchmark UST 10yr yield is at 1.89%. Investors are bracing for a further rise in bond yields in a sign that views on the global economy have turned more optimistic following a run of better-than-expected data.
UST liquidation pressure may have arisen in response to a strong rise in domestic Chinese rates and possible eurodollar re-financing issues demanding further official liquidation?
Benchmark treasury three- and five-year treasury yields are now up over 20 basis points since the beginning of April, as strong March inflation and activity data have dampened expectations about the pace of monetary easing. Read more - China 3yr & 5yr note quotes.
Wanna back a certainty....Get your own security. Own it it like the czar u wannabe.
http://www.marketwatch.com/story/putin-forms-new-russian-security-force…
Answerable to no one......come the revolution....in voter dissent.
House prices falling everywhere other than NZ
http://www.businessinsider.com.au/median-house-prices-have-tumbled-back…
Key regarding a Land Tax on non residents:
"If the thing became a runaway train on us and we were really concerned about it, that's always an option available," he told Q+A on Sunday.
In other words, "we will wait until the horse has completely bolted before we do diddly squat" .
Jezz, politicians are just hopeless. It's like they actually want a blood bath full of anger!
What will it take for these clowns to get the message?
a lot of us see JK for what he is, a good salesperson , h
e is doing what he is good at lots of talky talky not much doing.
he has managed to surround himself with protection from the speaker that lets him stick it to the opposition without them getting a right of reply to making sure no ready replacement is close enough and any up and comer is kept under check
Looks like the pro brexit gang got a bit of a hammer blow over the weekend. Considering the stay in lot had a 10 point lead(if you just take the telephone polls,not the Internet ones) before Obama got to London it is very difficult to see them being able to bounce back as they have fired all their shots. Sterling has probably seen its low.
Well I think he tried scare everyone that is listening , but I think the contempt of the people against Obama and his ilk will backfire .
People want Nationalism and this reinforces the need to leave Euro, America and start again , the web is immensely tangled and I fear by the time this process finished any left standing will have knives in their backs. Good or bad I hope they vote to leave ! How about you ?
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