♦ Issue 2010/05
24 May 2010♦
Personal Finance & Investment
Newsletter
News and Updates for the Savvy Kiwi Indian
IIssssuuee CCoonntteennttss IInnvveessttm
meennttss
With the Eurozone debt crisis remaing the key
Financial Briefs: focus, global markets continued their decline
NZ 2 last week. The U.S. S&P 500 index dropped over
India 3 10 percent from recent highs indicating the
broader market is now in a correction, amid a
FX/Commodities Snapshot rally that started on March 2009. Index-linked
4 companies are now trading at about 15.5 times
the reported operating earnings over the past
12 months- the lowest valuation since July
Financial Jokes/Quotes 4 2009. MSCI’s Emerging Market index fell over
7.6% last week, while the NZX lost over 4.4%
Special: and India’s BSE over 3.2% for the same period.
NZ Budget 2010 The 19-commodity Reuters-Jefferies CRB index,
(Highlights) 5 a global commodities benchmark, slumped to 8-
1/2 month lows last week as the Eurozone
NZ-India Trade 6 contagion cut further into prices of oil and other
●●●●●● M
Moorrttggaaggeess
After a quiet few weeks with no mortgage rate
NZ’s BEST BANKS changes, there was a sudden step-change with
14 lenders increasing their short-term rates
over the last couple weeks. Westpac, Wairarapa
CUSTOMER Building Society, BNZ, PSIS, Kiwibank, AMP, SBS
BANK SATISFACTION Bank, ASB Bank, BankDirect, NZ Home Loans,
(%) Sovereign and HBS all increased their short-
term rates ranging from six months to two
ASB 55% years.
Interestingly, National Bank and ANZ made the
BNZ 46% largest increases to their short-term rates and
then cut them all again on May 14, National
NATIONAL 43% Bank by 10 basis points and ANZ cutting its one
BANK and two-year rates to meet the medians for the
major banks of 6.35% and 7.30% respectively
WESTPAC 40% as well as reducing its 18-month rate by 16
basis points to 6.69%.
ANZ 40%
IInnssuurraannccee
Source: "Better Banking" survey,
carried out for bank workers union
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© Copyright 2010 A.S.K.
Publishing. All rights reserved.
Free Fortnightly Issue
key raw materials. U.S. Treasury debt prices
moved higher as the shift to safe haven
securities persisted through the week. Yields on
the 10-year Treasury notes dropped to 3.22
percent from 3.81% a month ago. Australia 10-
year yield also dropped to 5.41% from 5.81% a
month ago. The U.S. dollar index, which had
been on a run-up in recent weeks, lost some
ground as the week drew to a close. On the
home front, swap traders see a 52 percent
probability the Reserve Bank of New Zealand
will raise rates in June, according to an index by
Credit Suisse Group AG. The RBNZ will increase
the target rate by 164 basis points over the next
12 months, according to a separate Credit Suisse
index.
Also in a surprise move on May 14, ASB Bank,
BankDirect, Sovereign and NZ Home Loans cut
their six-month fixed rates by 15 basis points in
a week that saw other lenders increasing the
same rate by anywhere between 10 and 30
points.
The other changes these four lenders made
included a 10 basis point increase to their one-
year rates, a 25 basis point increase to 18-
month rates and their two-year rates rose 20
basis points.
Also in the news, Kiwibank and HSBC got a rap
on the knuckles and repaid $0.8 million in
overcharged break fees on fixed-term loans
following complaints after the sharp drop in
interest rates in late 2008 and early 2009.
TOWER premiums to rise 7%
The increase is to its new and existing Life over
policies in the TOWER Life 360 and TOWER
Business 360 product ranges. This increase only
relates to life cover and there will be no general
premium increase for any other individual risk
products including trauma cover, permanent
disability cover or income protection cover. No
changes will be made to commission payments
to advisers.
 Personal Finance & Investment
Newsletter

NZ HOUSE PRICES, SALES DIP IN APRIL - REINZ NZ CONSUMER CONFIDENCE PERKS UP IN MAY

New Zealand house sales and prices fell in April, the Real Estate New Zealand consumer confidence was
Institute of New Zealand (REINZ) said recently. Sales by the stronger in May, with respondents feeling more
industry group's members fell 15.5 percent from March and were positive about both their own outlook and
16.2 percent lower than a year ago. The national median house
price was NZ$356,000, down 1.2 percent from March but 4.7 that of the economy. The ANZ-Roy Morgan Consumer confidence
percent higher than the same month last year. The REINZ's house index rose four points to 126, the third monthly increase, but still
price index was 0.4 percent lower on the previous month and 6.2 behind January's peak of 131.4. A reading above 100 shows
percent higher than a year earlier. The housing market recovery has optimism, and a reading below indicates pessimism. The survey of
slowed over recent months, with potential tax changes to around 1,000 people showed respondents were more optimistic
investment property cooling activity. The median number of days to about the near- and long-term outlooks for the overall economy,
sell rose to 40 from 35 in March. Government agency Quotable and a net 21 percent believing it is a good time to buy a major
Value said this week growth in house prices stalled in April, but the household item.
market remained subdued because of uncertainty over changes in
property taxation. NZ DROPS IN WORLD COMPETITIVENESS RANKINGS- IMD

RENTS MAY RISE UP TO 6.5% New Zealand has slipped

five places to 20th out of
Rents could increase by 4.5 percent to 6.5 percent, the New Zealand 58 economies measured
Property Investors' Federation (NZPIF) says. The figure was higher on the world
than Treasury's estimate of 1.5 percent over three to four years. competitiveness
Owners of commercial buildings and rental houses will no longer be scoreboard according to
able to claim depreciation on their investments. The Budget also the just released IMD
removed a 20 percent depreciation loading on new plant and World Competitiveness
equipment purchased after Budget day. Finance Minister Bill Yearbook. New Zealand's
English and Revenue Minister Peter Dunne said the moves would economic performance,
help rebalance the economy toward productive investment and business efficiency and its
reduce the incentive for people to buy rental property purely for tax infrastructure
reasons. performance all slipped
slightly, but sufficiently
SERVICE SECTOR EXPANSION SOFTENS, BUT EMPLOYMENT overall to negatively
PICKS UP impact the economy's total
performance. Only its
The service sector experienced its sixth consecutive month of government efficiency
expansion, although activity softened slightly in April, according to rating improved - from 7th
the BNZ - Business NZ Performance of Services Index (PSI). The to 5th place. According to IMD, the problem for New Zealand is that
seasonally adjusted PSI for April stood at 54.1. This was 2.6 points too many other countries improved their relative performance and
down from March, but up 7.2 points from April 2009. A PSI reading consequently pushed New Zealand down the list. Australia is a good
above 50.0 indicates that the service sector is generally expanding; example of that.
below 50.0 that it is declining. "The most pleasing aspect of the April
result would have to be employment expansion reaching levels not
seen since mid-2007, along with being the second highest result
since the survey began. With its sister survey the Performance of
Manufacturing Index also showing a pick up in employment, along New Zealand NZX 50 Index
with Statistics New Zealand's official unemployment rate dropping Week High: 3193
for the March quarter, there is a clear indication that many Week Low: 3031
businesses are now in a position to again look at hiring additional Week Close: 3050
staff as orders and activity pick up.” said Business NZ chief
executive Daily Q.NZ50 9/02/2010 - 26/05/2010 (WEL)
Price Line, Q.NZ50, 21/05/2010, 3,050.083
NZ EARNERS' TAX BURDEN SECOND-LOWEST IN OECD NZD

The average New Zealand earner's total tax burden is second-lowest 3,250
in the OECD when superannuation and other compulsory taxes are
counted, according to a new report. The OECD represents 30 of the 3,200
world's richest economies. A tax wedge is the difference between
how much employers pay workers and how much workers take 3,150
home. Many countries had lower tax rates than New Zealand, but
had compulsory superannuation and social security payments that 3,100
increased their tax wedges. 3,050
15 22 01 08 15 22 29 06 12 19 26 03 10 17 24
February 2010 March 2010 April 2010 May 2010
source: Reuters
2
 Personal Finance & Investment
Newsletter

The euro has slid to its lowest since the Lehman

Brothers collapse and while the dollar has
strengthened against the euro, it has not strengthened
against the rupee to the same extent.
Europe is the second largest market for the Indian IT industry,
accounting for approximately $15 billion worth of exports. For firms
such as Tech Mahindra, WNS Global Services and Mastek, Europe is
the largest market, bigger than even the US. Top IT firms Tata
Consultancy Services, Infosys Technologies and Wipro earn between
20% and 25% of their revenues in euros and pounds. And Friday’s
euro crash, when the currency fell to a low of 1.24 against the dollar,
sent jitters through the industry. Since the beginning of this year,
the euro has lost around 13.5% against the dollar.

INDIA INC STEPS UP HIRING ACTIVITY

Riding on improving business confidence, Corporate India's online
hiring activity rose for the fifth month in a row. The Monster
Employment Index, a monthly gauge based on a comprehensive
review of employer job opportunities from a large selection of
online job sites, climbed by 7 per cent to 125 in April, from 117 in
March.The online employment availability in healthcare, bio
technology, life science and pharmaceuticals witnessed its largest
monthly rise. Overall, job opportunities rose in 18 of the 27 industry
sectors tracked in the survey.

INDIA CAR MARKET EXPANDS

Car sales in India rose an annual 39.5 percent in April as newer cars
widened the choice for customers. Domestic firms sold 143,976 cars
in the month, compared with 103,227 units a year ago, data from
the Society of Indian Automobile Manufacturers (SIAM) showed.
Sales of trucks and buses, a barometer of economic activity, rose
64.5 percent to 49,086 units in the months, SIAM said. Heartened by
a maturing Indian automobile market, Hyundai Motor has decided
to launch at least one new model in the country every year. Hyundai
claims to be India’s largest exporter of cars and second largest
passenger car manufacturer after the Indo-Japanese Maruti-Suzuki.

THE TOP CAR COMPANIES IN INDIA BASED ON MARKET SHARE:

Bombay Sensex Index

Week High: 17000
Week Low: 16187
Week Close: 16445
Daily Q.BSESN 9/02/2010 - 31/05/2010 (BOM)
Price Line, Q.BSESN, 21/05/2010, 16,445.61
INR
17,600

17,200

16,800

EURO CRASH, ECONOMIC WORRIES MAY CLOUD INDIAN IT

16,400
SECTOR

Economic uncertainty and a weakening currency in Europe are twin 16,000

worries for India’s export-focused IT sector, which has only just 15 22 02 08 15 22 29 05 12 19 26 03 10 17 24 31
recovered. from the fallout of the US slowdown. February 2010 March 2010 April 2010 May 2010
source: Reuters

3
 Personal Finance & Investment
Newsletter

The New Zealand dollar (NZD)

closed the volatile week almost 4%
lower (against USD) as spooked
investors moved to the safe haven
currencies of the United States dollar
and Japanese yen. With liquidity in
currency markets dropping, the
Daily QNZD= 9/02/2010 - 24/05/2010 (GMT) Daily QNZDINR=R 9/02/2010 - 24/05/2010 (GMT) markets are experiencing more
Pric e Line, QNZD=, 21/05/2010, 0.6782 Pric e Line, QNZDINR=R, 21/05/2010, 31.808 volatility than normal. The Indian
USD INR NZ$ / In d i a n R u p e e rupee (INR) posted its biggest
Week High: 32.15 weekly decline (against USD) in
0.71 32.2 Week Low: 30.79 nearly 14 years as domestic shares
Last Trade: 31.80 extended losses as concerns
0.7 32
remained over the euro zone's
31.8
0.69 NZ$ / US $ growth prospects. So far this month,
Week High: 0.7074 31.6 foreigners have pulled out $1.45
0.68 billion from domestic shares,
Week Low: 0.6617
31.4
Last Trade: 0.6782 bringing down net inflows in 2010 to
0.67
31.2 $5.1 billion. Last year, record
15 22 01 08 15 22 29 05 12 19 26 03 10 17 24 15 22 01 08 15 22 29 05 12 19 26 03 10 17 24 portfolio inflows of $17.5 billion had
February 2010 March 2010 April 2010 May 2010 February 2010 March 2010 April 2010 May 2010 helped the rupee gain 4.7 percent.
Against NZD, the rupee bounced off
its highs to close at 31.80.
Source: Reuters

Weekly YTD
14/05/2010 21/05/2010 Change Change
Gold prices registered their (%) (%)
Crude Oil prices fell to its 7-
biggest weekly drop in 5
month low last week, as Crude Oil (US$) 71.61 70.04 -2.19% -12.04%
months after rising 6% in the
underlying fundamentals
first 2 weeks of May to record
weakened. U.S. crude inventories Gold (US$) 1232.55 1175.15 -4.66% 7.24%
highs at $1,248.95 an ounce.
rose in 15 of the 16 weeks
Worries over the global
through May 14, according to
economy and uncertainty over
weekly data from the U.S. Energy
the impact of the new financial Source: Reuters
Information Administration.
reform bill in U.S. have led
Money managers and other
investors liquidating positions,
speculators broadly wound
including holdings in gold,
down their exposure.
during the recent market
correction.

Financial Quotes Financial Jokes

That some should be rich, shows that others may

become rich, and, hence, is just encouragement to
industry and enterprise.

Always bear in mind that your own resolution to

succeed is more important than any one thing.

Abraham Lincoln
-former U.S. president who led the country
during the American Civil War.

4
 Personal Finance & Investment
Newsletter

G ro w th & In fla tio n F o re c a s ts NZ D e b t F o re c a s t s

80
5.90%
KEY POINTS:
70
- Return to surplus in
60 2015/16, the same as in
the December
50

NZ$ (billions)
2010/11 mid-year update.
3.20% 3.10% 40 2011/12 - Government
2.40% 2012/13 forecasts: 2010/11 cash
30
deficit NZ$13.3 billion
20 dollars ($9.0 billion),
6.5 pct of GDP; 2011/12
10
cash deficit
0 NZ$9.7 billion, 4.5 pct of
Gross debt Net debt GDP
GDP (2011 - 2012) CPI (2011 - 2012)
- Net debt peaking at
27 percent of GDP in
Spending Highlights 2014/15, compared
Property tax measures include: with a peak at just over
Education
An extra $1.4 billion will be injected into 30 percent in June 2016
1) Denying depreciation deductions for in the December
better schooling and early childhood
buildings, such as rental housing and office forecast.
education - including an extra $417 million in
2010/11.
buildings, with an estimated useful life of 50 - Total bond issuance
years or more. This takes effect for all such estimated at NZ$12.5
Research, Scinece & Technology buildings from the start of the 2011/12 billion in 2010/11,
$321 million over four years for new science, income year. NZ$2 billion lower over
research and technology initiatives 2) Changes to the tax rules for qualifying forecast period.
companies (QCs) and loss attributing Planning to reintroduce
Infrastructure qualifying companies (LAQCs), taking effect
Another $1.45 billion for projects in 2010/11 - inflation-indexed bond.
from income years starting on or after 1 April - Government ups
the second year of a five-year $7.5 billion
2011. growth forecast to 3.2
infrastructure programme.
Broadband - $200 million for the roll out of
3) Preventing property investors from using pct in 2010/11 from 2.4
ultra-fast broadband, as well as $48 million more rental losses to inflate Working for Families pct previously.
for broadband in schools. eligibility and payments, from 1 April 2011. - Limiting new
4) Funding over the next four years for Inland spending at NZ$1.1
In addition, $10.7 billion over the next 10 years Revenue to target property speculators who billion as expected.
for State Highways and $3.3 billion in the next have been avoiding paying tax on their trading
five years to upgrade the national grid. gains.
5) Cutting the top personal tax rate from 38
Health
An extra $2.1 billion investment in health
per cent to 33 per cent, reducing the value of
priorities - including an extra $512 million in losses higher-income earners can claim on
2010/11. property investments.

Tax Changes
Income Current Rates New rates
$0 - $14,000 12.5% 10.5%
$14,001 - $48,000 21.0% 17.5%
$48,001 - $70,000 33.0% 30.0% effective Oct 1, 2010
Over $70,000 38.0% 33.0%

GST 12.5% 15.0% effective Oct 1, 2010

PIEs 30.0% 28.0% effective Oct 1, 2010

Company Tax 30.0% 28.0% effective April 1, 2011

Unit Trusts,
Life Insurance policyholders
and some other savings vehicles 30.0% 28.0% effective April 1, 2011

5
 Personal Finance & Investment
Newsletter
WHAT DO THE RATING AGENCIES THINK ABOUT THE
BUDGET?
Fitch Ratings said it would not change its negative outlook on
New Zealand's AA-plus sovereign rating despite higher
economic growth and lower debt forecasts in the government
budget on May 20. The credit ratings agency, which put New
Zealand on a negative outlook in July last year, said it would
undertake a complete review of New Zealand before considering
any change to the outlook.
FTA CAN RAISE INDIA-NEW ZEALAND TRADE FOUR FOLD:
ENVOY
India-New Zealand trade can grow four times to $4 billion in 10
years if a market-opening Free Trade Agreement is signed, New
Zealand High Commissioner to India Rupert Holborow has said. "At
a conservative estimate, trade will become over four fold in ten
years with the Free Trade Agreement (FTA) going through,"
Holborow told Press Trust of India (PTI).
Duty-free access for its agri products like apple and kiwi as well as
wine would be the key areas of interest for New Zealand, he said.
Holborow said India has high tariffs at both the Union and state
levels that New Zealand would like to negotiate in the FTA.
"There are a range of very high import duties on apple, kiwi fruit
and (especially) wine, both at the Union and state levels. These are
the things we would like to discuss." he said.
Negotiations on the FTA, which began in March, could take about a
year to conclude. Holborow said the trade agreement was not only a
tool to facilitate commerce between the two nations, but also a
valuable diplomatic instrument.
"FTA has two purposes. It has a value in itself as a diplomatic tool
irrespective of the end result. It is a very important diplomatic
vehicle to strengthen relationship between the two countries," the
High Commissioner said.
Of the one billion dollar bilateral trade, New Zealand enjoys an
advantage. Its exports to India are worth $700 million, whereas
Indian exports are valued at $300 million.
After operationalising a FTA with ASEAN, the 10-nation South East
Asian bloc and South Korea in January this year, India is negotiating
a slew of such pacts with Australia, New Zealand, the European
Union and Japan.
NEW SUZUKI ALTO DEMAND SETS MARUTI PLANT HUMMING
The new Suzuki Alto, which
recently launched in New
Zealand, is driving the Indian
arm of Suzuki to record
heights. Maruti Suzuki, the
Indian division of Suzuki, is
expanding its plant capacity
to meet high international
demand for the latest Alto
hatchback. New investment
at the company’s Manesar factory which makes the Alto will
increase annual production from 300,000 units to 550,000 by April
The government said on May 20 quickening growth would
reduce the shortfall in its finances and allow it to borrow less
in the medium term while raising its growth forecast for the
year to March 2011 to 3.2 percent from a previous 2.4 percent
in the December mid-year update.
Earlier, Standard & Poor's also said its view on New Zealand's
sovereign creditworthiness was unchanged after the budget. It
gives New Zealand a foreign currency rating of AA+/Stable/A-
1+ and a local currency rating of AAA/Stable/A-1+.
2012. Total Maruti production last year was a record 966,399
Suzuki units and the company predicts sales will top one million for
the fiscal year ending March 2010.
Suzuki played an ace card by entering the Indian market almost 30
years ago when other car makers ignored the country. A joint
venture was formed with Maruti Udyog, an Indian state owned
company, in 1982. When the second generation Alto-based Maruti
800 mini-car launched the following year, the total annual Indian
car market was around 100,000 units, or less than twice the volume
of the New Zealand new car market. Now the Indian car market is
fourteen times larger than the New Zealand market, and continues
to grow at a much faster rate.
“When the original Alto arrived in Japan in the late 1970s there was
a slump in mini-vehicle demand,” said Tom Peck, General Manager
of Marketing for Suzuki New Zealand. “But the original monthly
sales target of 5,000 was soon broken and the model soon became
Suzuki’s top-selling model.”
“The new Alto is selling well in India and there is no doubt Maruti
has weathered the recession much better than others,” he said. “We
may see other new Maruti Suzuki models available in New Zealand
in future.”
MILKFED MULLS TIE-UP WITH NZ’S FONTERRA
Punjab's Milkfed is mulling a joint venture with Fonterra—largest
dairy cooperative of New Zealand. A two-member team of Fonterra
comprising David Broad, general manager, International Operation
and Hamish Govans, sales manager on Thursday visited the state on
invitation from Milkfed.
Disclosing this, a spokesman of the Punjab cooperation department
said that Fonterra officials visited dairy farms and milk
procurement societies of milk union, Ludhiana and Mohali. The
Fonterra officials were also shown various milk processing facilities
at milk plant, Ludhiana. They also visited cattle feed plant at Khanna
and Modern Semen Station at Khanna. The Officials evinced keen
interest in the dairy cooperative system of Punjab and working of
the Milkfed. The visiting officials were apprised of the progress
made by Milkfed during the last four years and the ever increasing
trends in the turnover of Milkfed Punjab from 22-25% and the
successful experiment of larger scale dairy farming in the state.
Later, David Broad made a presentation highlighting the functioning
of Fonterra and compared the working of dairy cooperatives in
India and New Zealand.
6

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