Kiwi strong as investors still favour NZ

Colonial’s record profit reflects NZ vehicle sales high

The New Zealand dollar is heading for a 1.1 per cent weekly gain against the greenback as the country’s relatively high yields continue to attract investors in search of decent returns in a world where major central banks are running near- zero interest rate policies.

The kiwi rose to US72.70c at 5pm yesterday from US71.89c on Friday in New York last week. It was down from US72.91c at 8am and US72.88c on Thursday.

The trade- weighted index is heading for a 0.7 per cent weekly gain, trading at 76.85 from 76.31 last week, and little changed from 76.80 on Thursday.

Investors’ expectations for future US rate hikes dimmed this week after minutes to the Federal Reserve’s last policy meeting showed little desire to tighten.

That has left New Zealand an attractive place for international investors with an economy enjoying booming tourism and building activity and a Reserve Bank yet to exhaust conventional monetary policy.

The yield on New Zealand’s 10- year government bonds at 2.23 per cent remains more attractive than Australia’s equivalent government bond, which was recently at a yield of 1.93 per cent, and US 10- year Treasuries’ yield of 1.55 per cent.

“The kiwi is still at elevated levels and the Reserve Bank still won’t like it, but until they lower rates it’s going to stay attractive,” said Michael Johnston, senior trader at HiFX in Auckland. Colonial Motor Company, which owns motor vehicle dealerships nationwide, posted a record underlying profit of $ 19.2 million as the nation’s new vehicle industry hit its highest level of sales.

Trading profit for the year ended June 30 was up 18 per cent on last year’s $ 16.3m, the Wellington- based company said, though the results are still preliminary and unaudited.

Property and investment revaluations and a gain on the sale of a property lifted net profit to $ 21.5m.

The new vehicle industry had a 5 per cent sales lift on the previous year in the first six months of 2016 and CMC’s two main brands, Ford and Mazda, both increased their market share. The Ford Ranger, a light commercial, was New Zealand’s top- selling vehicle in the first half of the year.

CMC increased revenue to $ 867m, up nearly 10 per cent on the previous year.

The company has purchased a site at Te Rapa in Hamilton to develop as a parts and service centre for Southpac Trucks. It opened a new airport service centre for Ford and Mazda in South Auckland in January and is trying to lease a site for a service centre in Takanini.