New Zealand’s Economy Faces More Upside Risks

It‘s believed that New Zealand's economy will maintain a slow growth in the first half of 2020, and then gradually pick up speed. The upside risks for the economy are greater than downside risks. The Reserve Bank of New Zealand is expected to lower its cash rate in May. Investors should focus more on the big picture of the country’s economy and keep an eye on relevant news events in New Zealand.

First, in the past year, New Zealand's economy has not been entirely in the hands of locals, but subject to the impact of various factors such as weather, natural disasters, commodity prices, global geopolitics, global credit markets and the New Zealand dollar trend.

More specifically, investors also need to pay attention to indicators that are the most relevant to policy-make, such as credit availability, business confidence indices, details of government infrastructure spending real estate markets and indicators reflecting resource constraints and inflationary pressures in the economy.

In addition, whether the Renminbi will remain robust and whether recovery of Asian exports is sustainable also significantly influence the trend of the New Zealand dollar, while the US election and the challenges facing regional economic recovery will also weigh on Asian stock market in the second half of the year.

We believe that for NZD / USD, the target is 0.65 at the end of March, 0.66 at the end of September, and 0.67 at the end of the year. Compared with the fair price,which is around 0.71 according to model estimation, the NZD is relatively undervalued, and it is expected that the NZD will have upside risks.