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A review of things you need to know before you go home on Monday; Kiwi Group Holding ponders the value of Kiwi Wealth, NZX50 struggles, China's growth hangs in there, swaps jump, NZD holds, & more

Business / news
A review of things you need to know before you go home on Monday; Kiwi Group Holding ponders the value of Kiwi Wealth, NZX50 struggles, China's growth hangs in there, swaps jump, NZD holds, & more

Welcome to our first of these daily summaries in 2022. Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
No changes to report today.

TERM DEPOSIT RATE CHANGES
None here either.

KIWI WEALTH ON THE BLOCK?
Market speculation is high that SOE Kiwi Group Holdings is about to sell its $9 bln Kiwi Wealth subsidiary, after selling Kiwi Insurance, and Hatch. It is an enterprise where funds under management has swelled 7½ times since it was first purchased as Gareth Morgan Investments ten years ago.

NZX ENDURES A TOUGH WEEK
Last week was a tough one for the NZX50. Capitalisation fell a rather sharp -1.9% from the prior week and is now down -2.3% from the same week a year ago. The largest fall for the week was by Serko (SKO, #38) by -14%. Other notable falls were Sky TV (SKT, #43) -10%, Vista Group (VGL, #39) -9.2% and Kathmandu by -7.9% (KMD, #31). The largest rise was by Restaurant Brands (RBD, #45) which rose +5.1%. Of course, all these changes happened in very light trading.

JAPAN MACHINERY ORDER DATA IMPRESSES
In Japan, November machinery orders rose faster than expected both on a month-on-month basis (+3.4%) and a year-on-year basis (+11.6%).

CHINA'S GROWTH DOESN'T SAG AS MUCH AS EXPECTED
In China they reported their Q4 GDP as up +4.0% from the same quarter in 2020, which is much better than anticipated but down from, +4.9% in Q3-2021.

BUT CHINA'S RETAIL SECTOR NEARLY STALLED
However, Chinese retail activity struggled in December, rising just +1.7% year-on-year when a +3.7% rise was expected and November was up +3.9%. For all of 2021 retail sales were up +12.5% so most of that came early in the year and relies on a suppressed base effect.

CHINA'S INDUSTRIAL PRODUCTION AIDED BY EXPORTS
China's industrial production was a bright spot, up +4.3% and its best rise in four months even it is unusually low for them. Only a recovering rest-of-world and the export orders from them saved the day.

BUT DOUBT ABOUT ALL METRICS CAST BY POWER DATA
Chinese electricity production tells the real story - it actually fell -2.1% year-on-year, so that kind of does cloud the other data results and suggests, even if they are positive, the real story might not be so good. Everything is 'national security' in China, so reporting declines is frowned on again.

LOCAL PANDEMIC UPDATE
In NSW, there were 29,504 new community cases reported yesterday, a sharpish rise, now with 338,613 active locally-acquired cases (and undoubtedly an undercount), and 17 more deaths. Hospitals face serious staff shortages, and they have been told the number of COVID-positive people needing inpatient care could exceed 4500 within the month. They are now up to 2,776. The NSW Chief Health Officer there will a high number of deaths in coming days. In Victoria they reported 22,429 more new infections yesterday, also an increase. There are now 245,040 active cases in that state - and there were 6 deaths. Queensland is reporting 15,122 new cases and 7 new deaths. In South Australia, new cases have held at 3,829 yesterday with no more deaths. The ACT has 1316 new cases and 2 deaths and Tasmania 1037 new cases. Overall in Australia, 68,092 new cases were reported yesterday so far although not all counts are in yet. In New Zealand, there were 42 cases stopped at the border, plus 16 new cases in the community.

GOLD SLIPS
In early Asian trading, gold is at US$1815/oz and down US$3 from final trading on Saturday. US markets will be closed tomorrow for a public holiday (MLKing Day).

EQUITIES MOSTLY FLAT, BUT TOKYO TAKES OFF
The NZX50 is down -0.2% near the close of trading today. The ASX200 is flat in early afternoon trade. Tokyo has opened strongly, up +1.0% in early trade. But Hong Kong has opened down -0.5% and falling while Shanghai has opened up +0.2% and marginally firmer. US markets will be closed tomorrow for a public holiday (MLKing Day).

SWAPS JUMP
We don't have today's closing swap rates yet. They are likely to be a lot higher as short rates rise even faster than long rates which are also rising. We are in catchup mode today following the Friday rises in the US. 1, 2 and 3 year rates will be up +4 or +5 bps, ten year rates up +7 bps. The 90 day bank bill rate is up +7 bps at 1.04%. The Australian Govt ten year benchmark bond rate is up +5 bps at 1.91%. The China Govt 10yr is unchanged at 2.81%. The New Zealand Govt 10 year bond rate is now at 2.53% and up +6 bps but still below the earlier RBNZ fix for that 10yr rate at 2.55% (up +3 bps). The US Govt ten year is now at 1.79% and unchanged. But you should recall it was at 1.46% just before Christmas.

NZ DOLLAR UNCHANGED
The Kiwi dollar is now at 68 USc and little-changed. Against the Aussie we are also marginally softer at 94.3 AUc. Against the euro we are holding at 59.6 euro cents. That means the TWI-5 is now just over 72.2 and unchanged.


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BITCOIN DOWN
The bitcoin price has slipped to US$42,873 and lower by -1.3% than where we opened this morning. Volatility over the past 24 hours has been modest at just over +/- 1.0%.

This soil moisture chart is animated here.

Keep ahead of upcoming events by following our Economic Calendar here ».

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Source: CoinDesk

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13 Comments

Hi all, sorry for my simplistic question - is it reasonable to expect that if Fed raises their interest by 0.5 %, then due to swaps and wholesale markets etc.. NZ retail mortgage rates will move up by similar percentage ?

What impact if any does 10 year USDT bond return have ?

Thanks. So many experts here I cant wait for the answer ! :)

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Hi VC, great to see someone using this platform to try to learn something.  I'm not so sure there are "so many expert" here, make sure you understand the difference between an opinion and a fact.  Sorry but I won't answer your question as bonds are not my expertise, I'm more of a property guy but I hope that someone will reply you.

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The world is moving away from LIBOR [originally birthed to service an Iranian loan in the 60's]. It's unclear if the adoption of new rate benchmarks will be a globally accepted thing. This coupled with NZ government and private debt being denominated in NZ Dollars.. I wouldn't put too much stock in what's happening with swaps.

Also Note: the RBNZ has been the biggest buyer of government bonds and has effectively been able to set-the-price. There is a legislative limit [very high] as to the percentage of total bonds the RBNZ can hold.. however they are probably rubbing up against that limit now.. laws and charters can easily be changed by the current regime though.

NZ should be thought of as a banana republic, except instead of bananas it's housing. Interest rates such as the OCR reflect the price of money. Real interest rates (interest rates - inflation) are deeply negative. I wouldn't worry about a US 0.5 of a basis point increase - the NZ dollar is effectively garbage already for a large percentage of the population, especially salary/wage earners and renters.

Effectively this means nothing in NZ will get done as remunerations (NZ Dollars) aren't desirable. Modern forms of slavery might be imposed/condoned more by the current regime going forward.

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Characteristics of a Banana Republic

The way the phrase banana republic is used has evolved since it was introduced more than a century ago. It is no longer limited to countries in Central America or the tropics. Key characteristics of a banana republic in the modern world include:

  • widespread government corruption - increasing
  • tyrannical government - check
  • unstable government - check
  • civil unrest - not yet
  • coup attempts/insurgency - maybe one day
  • economic dependency on exporting a limited natural resource (which may or may not be bananas) - check
  • infrastructure owned/supported by out-of-country interests - check
  • overall economic dependency on foreign investment or business entities - check
  • widespread poverty - check
  • significant stratification of social classes - check
  • enormous gap between the haves and have nots - check
  • lack of a middle class - check

https://examples.yourdictionary.com/what-is-banana-republic-explanation…

We are closer than we like to think.

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# Completely controlled country and run as a plantation by and for a foreign company.  With bananas that is literally how it worked 

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Bananas don't grow that well here, maybe we are an Avocado Republic ? I love them smashed.

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The way some on this website talk about this country, you’d think we are living in Turkey.

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There is certainly frustration growing amongst the youth. I’m sure everyone can feel it too? I don’t like the way the country is headed either. A massive reset would seem to be the best outcome to be honest, I’d definitely feel for all the Business owners/staff out there, but what else is there to do? I wouldn’t be surprised if we saw protesting soon about the state of the housing market… heck, I might join in. 
 

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See what I mean VanillaChilli?  all the above comments after Zack Brando are completely off the topic of your question and are "opinions"

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The 90 day bank bill rate is up +7 bps at 1.04%.

NZDM is taking a rest from funding in the Treasury Bill market.

Treasury bill tenders will resume on the 25th of January 2022 and will be conducted fortnightly, rather than weekly. Note that tender sizes are expected to remain similar, on average, to those held during the 2021 calendar year.

The change supports plans to reduce Treasury bills on issue by around $3 billion over the 2021/22 fiscal year, as announced at HYEFU 2021. Link

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The 90 day bill now fully pricing in the OCR feb to 1.0%

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Retail sales data for China not pretty. What was more concerning was the mobility data which showed the virus is halting much movement between prefectures. 

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Well overdue for another treatise from Comrade X extolling the virtues of Sinovac & Sinopharm are we not? Car 42 where are you?

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