“Whatever it takes” – Reserve Bank of New Zealand Governor Adrian Orr as he cut the official cash rate (OCR) to a record low of 1%.

MARKET COMMENTARY

NZ’s domestic outlook is far from weak, however the RBNZ worries about the global picture. Governor Adrian Orr said the RBNZ is ready to do “whatever it takes” – echoing the famous words of ECB president Mario Draghi in the midst of the European Debt Crisis. Be prepared for an uncharted future – negative interest rates in NZ have not been ruled out.

Trade wars: August has seen the US-China trade dispute deteriorate significantly. The US declared negotiations were progressing too slowly and announced new tariffs on the remaining $300 billion of imports from China without tariffs.

Retaliation: China didn’t stand still – the People’s Bank of China let the Chinese Renminbi depreciate below the key 7-per-dollar level for the first time since 2008. Chinese firms also suspended buying US agricultural products. The result – a sharp increase in equity market volatility and investor uncertainty.

Market volatility: Tensions have escalated, and there are growing risks around the potential impact on global economic growth. With no sign of a solution, volatility is likely to remain elevated. We have little exposure to China through our global funds and are also underweight emerging markets.

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