Impact of Chinese crackdown on overseas investment questioned; Trump expected to send more troops to Afghanistan; Central bank direction change possible at Jackson Hole; UST 10yr yield down to 2.19%; oil down, gold up; NZ$1 = 73.2 US¢, TWI-5 = 75.6

Here's my summary of the key events from overnight that affect New Zealand.

There are question marks over how a new guideline restricting Chinese corporate investment overseas could affect the property market in this part of the world. Media across the ditch are reporting that rules specifically restricting investment in real estate and hotels could worsen the Australian real estate drop-off. 38% of residential development sites in Australia were reportedly bought by Chinese companies last year.

China’s capital controls have already slowed the New Zealand property market, so this round of crackdowns are worth keeping an eye on.

HNA, the Chinese buyer of ANZ’s UDC Finance, has also recently come under scrutiny by Chinese authorities keen to keep investment inward focused.

US President Donald Trump is expected to later today announce he’ll be deploying more troops to Afghanistan. While he has expressed scepticism over the US’s involvement in the country, he is expected to give his pro-involvement Defence Secretary the green light to set troop numbers. There are currently around 8,400 US troops in Afghanistan. The Taliban insurgent forces are still no nearer to being defeated.

Australian Prime Minister Malcolm Turnbull has hit back at North Korea for describing Australia's participation in military exercises with the US and South Korea as "suicidal". North Korea had described the move as “an illustration of political immaturity unaware of the seriousness of the current situation". However Turnbull has responded by urging the international community to "bring North Korea to its senses".

The financial world is turning its focus to a meeting of central bankers in Jackson Hole, Wyoming later this week. Credit Suisse’s chief investment officer, Michael O’Sullivan, reckons the event offers a chance for central banks to hand over the baton to governments to take on more of the burden of economic policy. He says: “While this year’s symposium offers central bankers a platform to break with the recent past in laying the ground for less generous monetary policy, it may also be a watershed event in the changing of the guard in central banking.”

The UST 10yr yield has continued to track down to 2.19%.

The oil price has fallen by nearly a dollar since this time yesterday. The US crude benchmark is at US$47.40 a barrel, while the Brent benchmark is at US$51.60.

The gold price is up a little to US$1,290/oz.

Turning to the currency market, geopolitical instability ahead of the Jackson Hole meeting has weakened the US dollar over the last couple of days. However the New Zealand dollar remains at 73.2 USc and 92.3 AU¢. It’s fallen to 61.2 euro cents. The TWI-5 index is down a notch to 75.6.

If you want to catch up with Monday's news, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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21 Comments

The gold price is up a little to US$1,290/oz.

Unlike other metals.

While overnight equity, bond and FX markets traded in a narrow range as a result of scarce mid-summer liquidity, mounting Trump administration and geopolitical concerns and uncertainties ahead of Friday's Jackson Hole symposium, the same can not be said about the latest "berserker" action in the commodity space in general, and industrial metals in particular, where China's horde of momentum-chasing speculators were unleashed overnight, sending Zinc to its highest since October 2007 at $3,180.50 a tonne, the bellwether industrial metal, and "doctor", copper surged to to $6,593 a tonne, its highest since November 2014, while nickel, used in stainless steel production, gained over 2 percent as it reached a 2017 peak.

Additionally, iron ore futures traded in Dalian soared more than 4% fueled by concerns of shortages and before curbs on futures purchases which are touted to come into force in the next few months. Read more

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If China's stricter capital controls are dampening the Auckland housing market, then will politicians admit that their money/buying was driving up house prices in Auckland?

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wont matter as they wont be around to admit it,
nZ first and labour will ban non citizens from buying existing properties so then new schemes will have to be thought up to get around that

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I doubt that National will ever admit to just how much overseas investors ruled as the top end buyers for Auckland. One thing is for sure we could really do with that Foreign Buyers tax even thought the horse has bolted (Or in the case locked in the stable).

The question now is how do we collect tax revenue from the Foreign Investors as they head for the exit?

Increasing that CGT tax limit to 5 years sounds like a sensible solution. I've noticed that Auckland property listings has started to increase again and we're not full out of Winter yet.

Are we being directed to look away from reality by apparatchiks other than our incompetent central bankers?

There is always common ground for those who dare to seek it.

Remember the "Russians hacked our election!" hysteria--or have you already forgotten? That entire narrative collapsed under a deluge of factual evidence that the Democratic National Committee (DNC) data release was an insider job, and a compelling lack of evidence of any other Russian hacking.

That failed narrative has now been replaced with a new mass hysteria: "a new cultural Civil War is inevitable." In this narrative, America has succumbed to us-versus-them divisions divided by all-or-nothing ideological bright lines.

Snap out of it, America: you're being played, just as you were played by the absurd "Russia hacked the election" mania. Read more

The Western globalist elites have not digested Trump’s victory or Brexit yet. They are having a hard time dealing with their ideological failures, and when the reality dares not to comply with their day dreaming, they go online and create a parallel world, where their “expert” predictions always turn right and their failures cannot be questioned.

The Economist‘s portal named “what if”, a neo-liberal, wishful thinking echo chamber, is the point in case.

Its latest piece attributes magical powers to the new hero of the elites, Emmanuel Macron, who soundly defeated “evil” Marine Le Pen in May. For The Economist, Macron is nothing short of Jesus as he was correspondingly depicted on the monthly’s cover walking on water:... Read more

Of course China's stricter capital controls are going to slow down the market even more. But don't tell that to some of our Real Estate Agent buddies here on this site, they'll never believe you!

Some will even argue that they expect the market to take off again after the Elections. I mean who cares about logic and global events, right? Auckland is different, according to them.

"BRISBANE real estate deals are collapsing after a new Chinese Government sting on offshore investment.

Millions sunk into real estate are at risk, according to experts, but Queensland may have avoided a multibillion-dollar hit from a related Chinese Government ban on casino investments.

Property experts believe the situation has created a perfect storm for locals with deals aplenty as Chinese buyers topple on funding."

https://www.realestate.com.au/news/sting-in-dragons-tail-for-chinese-buy...

Thanks for the link, Doris! Here's a quote I find interesting:

"Agents have reported a flurry of Chinese investors wanted to offload new developments at discounted rates — a boon for locals via reduced prices and less competition. Cash-strapped Chinese buyers who paid 10 per cent deposits on units were willing to back out of deals with as little as a third of their deposit in hand “because 3 per cent (of the 10) is better than nothing”."

Now think about all those NZ Based Chinese who bought on behalf of rich overseas Chinese from 2014 to 2016. Now that they can't take money out of China to keep paying their interest-only mortgages, guess what they're gonna try to do? Offload property. In droves. They wouldn't flinch selling at a loss. Suddenly the 2014 CVs don't look as bad now, huh?

reddit Australia is full of housing stories today - there was a Four Corners documentary on there last night about housing debt levels and mortgage stress which is causing a lot of discussion.

Wait till the Chinese govt starts demanding that capital be repatriated, either we are going to see some very much price reduced sales or there will be a lot of properties with the Chinese Communist Party as their official owner.

Slightly scary prospect. What sovereignty do you have when a foreign power owns significant amounts of your land and resources and you lack the power to even legislate in ways undesirable to them? (In the face of retaliatory action.)

This is the sort of thing stupid politicians look back on and say "But how could we have known?"

That's an easy question to answer, you could have known by asking me, or you or any number of us, who, when they see a spade, understand what it is, and even what you use it for.

North Korea government labelling another as politically immature. Very amusing.

Could this be labelled irresponsible denial of the truth by omission? Read more and more

Why even talk about it, for as per John Key earlier and now Bill English - The Chinese money is hardly any in NZ property market.

Voters will and should give proper reply to national government if what they were saying was not truth.

Election not to far away

Housing will be the crux of the election. Nationals support of massive domestic and foreign speculation will see most tax paying Kiwis vote against them. As any third term government, only the reality of sitting in the opposition benches will afford them any insite into how badly they sold out the averageman tax payers in NZ.

IF Labour gets in I reckon they'd be well-served to commission investigations into how much foreign ownership has increased, how much healthcare waiting lists and measurement models have been fiddled etc. Sunlight is the best medicine and will serve them well - especially as they're likely to be handed a house of cards that could be on its way to falling over.

Yup a post-mortem of how we got into this mess is long overdue, they need to run through everything with a fine tooth comb, there's a shit-storm on the horizon. The rockstar economy is going to be exposed for the fraud it was, it would be a shame if the party that exacerbated the situation was then able to abdicate responsibility for it.

"China’s capital controls have already slowed the New Zealand property market, so this round of crackdowns are worth keeping an eye on."
Can I quote you on that?