As a follow on to this morning one reader noted that iShares Australia can be a proxy for New Zealand.I would disagree. The chart posted in one year but if you play around with other time periods I believe you will see what I see which is that EWA, which several clients own, is quite a bit more volatile than the NZ 50 which is the benchmark index for New Zealand.
Despite the two often being lumped together the economies are quite different. New Zealand doesn't really have much in the ground that it mines and then exports to other countries. It is more centered on farming, animals and animal byproducts (like milk exports to China). Australia has a fair bit of wheat but it is the mining companies that far more move the needle than things like Graincorp (GNC.AX) or ABB Grain (ABB.AX).
The positive attribute to New Zealand from the top down is that it is different type of economy than the US but not commodity/oil based and NZ is almost always less volatile than the US. In building a portfolio that takes in numerous countries while avoiding others you need many different types; more volatile/less volatile, surplus/deficit, emerging/developed and so on.
5 comments:
Shooting me down eh? Well reasoned thoughts though!! Good work Roger!
Great post, always good to hear from you
I agree that there is little in common between Australia and New Zealand apart from the fact that we are both former British colonies in the Southern Hemisphere. OTOH EWA is measured in USD and the New Zealand index in the local currency. So the conversion to USD adds in another source of variance. A better comparison is ^AORD or another Australian index to the NZ Index. I used to be a shareholder in Telecom NZ after they took over Australia's AAPT and before the retail/wholesale separation thing came in. I wouldn't invest in them now. NZ is a very small market. Many of the biggest stock are secondary listings of Australian stocks.
m00m, as EWA is how Americans access Oz (one of several ways of course) I specifically chose it, currency effect and all.
No problem there, just that it's not directly comparable to the NZ index in local currency.
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