New Zealand is expected to have a boom 2014 year, which could see the New Zealand dollar pass through parity with the Australian dollar. That's bad news for Aussie tourists heading to 'The Land of the Long White Cloud'.
But it could also be good news for Australian investors in New Zealand-based stocks, such as Telecom New Zealand (ASX: TEL), Chorus (ASX: CNU), Fonterra Shareholders Fund (ASX: FSF) and Fisher & Paykel Healthcare (ASX: FSH).
According to HSBC analysts, New Zealand's economy is firing on all cylinders, with gross domestic product (GDP) expected to grow at 3.4% in 2014, outperforming almost all other OECD economies, except Chile, Israel and Mexico. HSBC says the NZ economy is being driven by three factors, one of which is the rebuilding of earthquake damaged Christchurch, estimated to see construction activity total NZ$40 billion, or around 20% of annual GDP. HSBC analysts say this is the equivalent to New Zealand as the resources boom Australia has experienced over the past decade.
New Zealand's role as the dominant provider of dairy products to China is also expected to drive growth – the country provides 60% of China's dairy imports – good news for dairy companies such as Fonterra. The third driver is the country's housing boom, which is expected to continue into 2014, despite the Reserve Bank of New Zealand placing limits on low-deposit-high value housing loans in August last year, amid fears of a housing bubble.
Foolish takeaway
For Australian investors, a rising Kiwi dollar means investing in Australian-listed New Zealand companies such as those mentioned above, as well as others like Fletcher Building (ASX: FBU), could see a boost in ASX-listed share prices and higher dividends. New Zealand stocks also pay franked dividends, a bonus for Australian self-managed super funds.
