National better for investors? It’s not that simple.

Broker Forsyth Barr has calculated that sharemarket investors usually cash in from National Party election victories. But in a sign that this doesn’t come with guarantee, the NZX has turned in a lacklustre performance over the past fortnight even as expectations of a National win climbed steeply on the back of a series of troubling polls for Labour.

Forsyth Barr calculated that, on average since 1957, investors in New Zealand shares had experienced a positive capital return on paper of 1.5% in the three months following each National victory, versus a 3.3% loss following Labour wins at the polls.

Moreover, on average during each three-year term, investors saw a capital gain of 8.3% under National and only 2.2% under Labour.

Forsyth Barr acknowledged that there could have been an element of bad luck for Labour.

“The timing of Labour's government terms have coincided with a number of key adverse market events through history; in particular, the 1987 crash, the bursting of the dot-com bubble, and the first half of the global financial crisis,” it said.

One explanation for the theory that shares should do better under National is the common assumption that government spending would be lower than under Labour and that would flow through to lower interest rates.

Hamilton Hindin Greene director Greg Hamilton says there is a feeling that the economic management of the country “hasn't been ideal”.

“If there is a change in government, I think that could potentially help the market in the short term.”

But inconveniently for that narrative, an increased expectation of a National win doesn’t appear to have breathed more life into the NZX as yet.

Hamilton says that the New Zealand sharemarket has instead been very quiet, with many investors taking a cautious approach as the election nears and choosing to take advantage of higher interest rates at the bank by parking more money in term deposits.

The NZX top-50 index fell on the eight days running up to Thursday, he observes.

One explanation for the seemingly weak linkage between the polls and the markets may be that whatever the Government’s spending missteps of the past, the question of which major party has the most interest-rate friendly policies, looking forward, doesn’t appear cut and dried.

Prime Minister Chris Hipkins told a BusinessNZ conference earlier this month it was ironic that he was “one of the great fiscal conservatives” in the election campaign, arguing this wasn’t the time for significant additional government spending or significant tax cuts.

No independent voices appear to be suggesting there’s a great deal in it.

ANZ chief economist Sharon Zollner says that like Labour, National appears happy to run large budget deficits for a few years, noting that while it is targeting bigger savings in government spending than Labour, it is planning to allocate those to the partial indexation of income tax thresholds.

Bank of New Zealand head of research Stephen Toplis says bank economists would be unlikely to stick their neck out by saying whether they thought further interest-rate rises were more likely under Labour or National, as it would be “bad form” for them to get dragged into an election campaign.

But that needn’t stop investors from making their own call if they believe the differences between the two parties’ fiscal plans are really enough to make a difference.

“What I would say is that the central bank will be watching the new government very closely and if it delivers policy that is stimulatory, then that increases the chances of a rate increase,” Toplis says.

“Whether you're talking about expenditure

increases or tax cuts, if the policy is seen as being more stimulatory than the economy can cope with at this juncture, then it would demand a reassessment of the interest rate track – I don't think there's anything contentious in that.” Picking individual investments that might benefit or lose out from any particular election outcome also involves being able to distinguish between shades of grey. Forsyth Barr notes that listed property companies can expect to lose out from changed tax depreciation rules proposed by both Labour or National, but says that should have already been priced into their share prices. Similarly, SkyCity might expect to benefit from either the Government’s “in principle” decision to block internet access to overseas gambling sites, or National’s threat to do likewise if overseas operators don’t pay taxes on profits they make from New Zealanders gambling on their sites. Electricity generators traditionally get a boost from reduced risks of regulation under National.

But they could also be expected to do well from a continuation of the largely hands-off approach of the current Labourled government, at least in the long run-up to any decision it made on whether to press ahead with a potentially market-changing investment in a Lake Onslow pumped hydro scheme.

Forsyth Barr suggests listed retirement-home businesses including Ryman and Summerset could benefit from

National's policy to reinstate interest-expense deductibility on property investments and to rein-back the “bright-line” test – to the extent those policies raised property prices.

It also says agri-businesses, including Fonterra, would be advantaged by the extra five years or so that they could have under a National government before being brought into the Emissions Trading Scheme.

Scratching around for smaller winners and losers, there is also NZME, the country’s only listed news-media stock.

Investors in that business would appear likely to lose out from National’s decision not to back a government bill aimed at bolstering the leverage of media firms in negotiations with the likes of Google and Facebook over payments for journalism.

Carbon credits, which can be traded on the NZX through a fund run by Salt Funds Management, have been shown to be one of the most politically-exposed investments, after losing and then recovering about a third of their value in the space of two months earlier this year due to swings in government policy.

But Salt director Paul Harrison sees no obvious implications flowing from the election, given that Labour, National, the Greens and the ACT Party have all voiced support for the Emissions Trading Scheme as at least a major mechanism to reduce emissions.

Underpinning carbon prices is a promise the Government has made to reduce New Zealand’s net carbon emissions to 50% of its 2005 gross emissions by 2030.

Although the National Party said the pledge could cripple the economy when Climate Change Minister James Shaw announced it at a United Nations conference in Glasgow in 2021, National’s climate spokesperson, Simon Watts, has confirmed it “will meet the commitment”.