News and Opinion, sponsored by RaboPlus

By Roger J Kerr

Larger corporate borrowers in New Zealand who have operated under strict funding and liquidity risk control limits per their Board-approved treasury management policies over the last 10 to 15 years, will be having a bit of a chuckle at the new RBNZ imposed liquidity/funding risk controls the banks now have to conform to.

The corporate funding risk policies forced a spread of debt terms and sources, even though this may have meant these borrowers had to borrow longer-term at higher credit margins than shorter-dated alternatives at times.

The efficacy of such policies have paid of in spades over the last 24 months for those corporates who complied to them. These funding risk policies protected them against the worst consequences of the credit crisis.
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Auckland Mortgage Trust General Manager Bruce Rasmussen said the trust expects to get back most, if not all of its 550 investors’ NZ$47.5 million capital following approval for the wind down of the fund.

Trustees Executors gave their approval to the request to wind down the fund at the end of May, but Rasmussen said that they had effectively been winding down the fund since the credit crunch in August 2007. The fund was initially frozen for 90 days on February 27, 2009.

Rasmussen said the decision to wind down the fund came as the market became too difficult to read. He said that it was hard to say how long the wind down would take, but it could be between two and three years, given “you’re not going to force property sales in this current market.” 

About 49% of the fund’s lending was on commercial property and almost 20% was on housing. All of its lending was first mortgages, Rasmussen said. He was unable to say how many of the fund’s loans were in default, saying the figures were currently with the fund’s auditors.

The fund’s quarterly returns fell to 6.36% (before tax, after fees and expenses) in the December quarter, from 8.75% in the September quarter and 9% in the June quarter of 2008.

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Here’s my top 10 links from the around the Internet over the last day or two.

Jon Stewart slaughters Jim Cramer on the Daily Show or “Brawl St” (The Full Version)

This is well worth watching throughout. Compelling and hilarious television. It will also make you very angry. People will remember this interview for years. Although Rauparaha over at TVHE is not so impressed.

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By Neville Bennett

The weekend news that the US and Japanese economies were diving did not surprise me. I look at a series of indicators which had picked a fall. Besides the futures market, I keep an eye on the Baltic Exchange for sea traffic and IATA for aviation.

IATA reported that international air cargo a fell by 22.6% in December year-on-year, and this has worsened in January 2009 with a 23% year-on-year drop. People in tourism especially should be aware that the Asia region and Trans-Pacific travel are the worst hit in the recession.

It is significant that Asia is the worst hit region in aviation revenue. This does not square too well with the general perception that the recession is biting deeper in the USA, UK and Europe. Many analysts look to China, India, Taiwan etc to pull the world out of recession. The aviation figures suggest a radically different view: perhaps Asia is pulling the world into recession.

A number of readers have approached me recently about my views on the length of the recession and how they can position their business. I have assured them that recessions actually have positives, and with the right strategies companies can survive and actually grow or improve their market share. The trick is to get the strategy right, and one key component is a good industry overview. I am looking at aviation this week because, outside of finance, it may be in the most challenged area. But it is remarkably adaptive and will thrive. I think its problems will interest all business.

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Reserve Bank of New Zealand Governor Alan Bollard has told the Jobs Summit in Auckland that the Reserve Bank would continue to run a ’stimulatory’ monetary policy to help the economy cope with the worst global recession since the 1930s and the biggest distruction of wealth in history. (more…)

Reserve Bank of New Zealand Governor Alan Bollard has told the Jobs Summit in Auckland that the Reserve Bank would continue to run a ’stimulatory’ monetary policy to help the economy cope with the worst global recession since the 1930s and the biggest distruction of wealth in history.

“The RBNZ for its part will ensure that monetary policy is appropriately stimulatory, that there is appropriate domestic liquidity available to banks, that we  remain ready further to changing financial circumstances and that our actions are co-ordinated with other government moves to promote stability for New Zealand,” Bollard said.

Bollard is widely expected to cut the Official Cash Rate by as much as 100 basis points on March 12 to 2.5%, which would drag nist variable mortgage rates and 6 month fixed rates down under 6%, although 1 year, 2 year, 3 year and 5 year rates are expected to remain at or over 6% because of increased international funding costs.  

Bollard also said there was a risk unemployment would rise over 7% because the global outlook had deteriorated sharply so far in 2009.

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