Since we lack a near-term crystal ball, let’s look at the long-term view. Economists at ANZ bank cite a pair of powerful catalysts that should set the stage for economic growth in coming years––a robust construction pipeline, and population growth that is running at its fastest pace in more than a decade.
The former is tied in part to spending associated with rebuilding efforts in Christchurch, New Zealand's third-largest city, which suffered a devastating earthquake in February 2011. The city's metro area has been in reconstruction mode ever since.
A stronger infrastructure and an expanding population means that steady economic growth can come without triggering wage-induced inflationary pressures.
For New Zealand, the elephant in the room is China, which has surpassed Australia to become the country’s top export market. The recent drop in dairy prices is one of many harbingers that the Chinese import machine may be slowing. Still, the Chinese economic juggernaut still has a long runway ahead, albeit at a lower rate of growth, which is a positive long-term catalyst for New Zealand.
The iShares MSCI New Zealand Capped ETF began trading in September 2010 at $26 a share and moved above $43 by the spring of 2014, or a jump of more than 65 percent. It has recently dipped below $35, plummeting to a 52-week low of $34.07 on July 7, which is off roughly 19 percent from its 52-week high.
The bulk of the portfolio is invested in dividend-paying mature companies, with a concentration in the utilities, healthcare, industrial and telecom sectors. The 0.48 percent expense ratio is slightly below the average country-specific ETF, while the 5.4 percent trailing yield is slightly above the peer group average.
New Zealand rarely dominates global investing conversations––perhaps that is due to the country’s metronome-like growth metrics. It’s an economy that isn’t built to grow as quickly as the Asian tigers such as China, Thailand and Indonesia, but it is proving to be more resilient than developed economy peers in Australia, Japan, and Europe.
The country’s “Goldilocks” approach to growth, coupled with a recent sharp pullback in the ENZL fund, makes this an opportune time to add it to your portfolio.