New Zealand business confidence languishes but foreign investors are keen on us

Tuesday, 15 October 2019

Kiwi business confidence may have a hit a 10-year low, but that pessimism doesn't appear to be shared by foreign firms, which look set to step up their investment in New Zealand next year.

New Zealand can look forward to more inbound investment in 2020 and beyond, according to a survey of 80 foreign businesses and private equity firms by law firm Simpson Grierson.

Simpson Grierson partner Andrew Matthews said the survey contained plenty of reasons for optimism.

'77 per cent of survey respondents indicated an intention to re-invest in New Zealand over the next three years and 86 per cent expect an increase in our overall merger and acquisitions activity through 2020,' he said.

Direct foreign investment in New Zealand has been on strongly upward trend since 2017 and that looks set to continue according to a Simpson Grierson survey.

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The acquisition of Trade Me for $2.65 billion by Britain's Apax Partners in May is an example of foreign direct investment in New Zealand.

Statistics NZ reported last month that the total value of direct foreign investments in New Zealand had risen to $113 billion at the end of March.

The trend has been strongly upward since a two-year period in 2015 and 2016 during which the value of foreign direct investment more or less flatlined at about $100b.

Australians were the biggest direct foreign investors in New Zealand with assets worth $57b, followed by Hong Kong ($9.6b), the United States ($7.4b but falling), Japan ($5.6b), and the UK ($5.3b).

The upbeat findings of Simpson Grierson's report come at a time when domestic business confidence appears in the doldrums.

ANZ reported last month that a net 54 per cent of respondents to its business confidence survey expected general business conditions to deteriorate in the year ahead.

The $3.4b purchase of Vodafone New Zealand by NZX-listed Infratil and Canada's Brookfield Asset Management shows how foreign investment flows are not always one way.

That prompted National Party finance spokesman Paul Goldsmith to say the Government's 'uncertainty and incompetence' had driven business confidence into the floor.

Relative to other countries, New Zealand represented 'an attractive, stable investment option' with many offshore investors seeing the country as providing 'a positive deal environment with fair valuations', Matthews said.

He did not comment on the apparent discrepancy between local and foreign sentiment, saying that wasn't the focus of Simpson Grierson's survey.

'We can look at those two pieces of information and probably ask questions about it [but] I think the really interesting thing to me is the results we have had show that there is a really strong impression globally of what we are doing in New Zealand in terms of our companies and expectations in the medium term.'

The foreign investors Simpson Grierson surveyed cited political and regulatory stability, 'advanced technology', and reasonable valuations and returns, as the top three reasons for investing in the country.

Foreign investors also saw New Zealand as being an effective 'buffer' against uncertain global market conditions, he said.

'Based on the feedback we received, medium-term offshore investor interest in New Zealand remains positive and may only grow stronger as global capital searches for and continues to find a home here – primarily coming from Asia Pacific investors but also from Europe and the US.'