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Key points:
a2 Milk downgrade seen weighing heavily on New Zealand index Software sector under pressure, but workflow and data ownership viewed as long-term edge Serko, Vista Group (ASX:VGL), Gentrack (ASX:GTK) highlighted as key NZ software names New Zealand OCR seen at cycle low, with markets pricing multiple hikes amid cost-push inflation
Brad Gordon from Forsyth Barr outlines a cautious yet opportunity-rich outlook for New Zealand equities as geopolitics and Middle East tensions weigh on markets. Gordon notes the NZX opens weakly, largely due to a2 Milk’s (ASX:A2M) downgrade, which is attributed to conflict-related disruption and operational issues, putting significant pressure on the index. Without that drag, Gordon judges the broader market tone as relatively robust given spikes in the oil price and heightened risk sentiment.
On technology, Gordon focuses on software names under pressure following Morgan Stanley downgrades, including Xero (ASX:XRO). He highlights New Zealand names Serko (ASX:SKO), Vista Group (ASX:VGL) and gene-tracking and utilities specialist Gentrack (ASX:GTK). Gordon stresses that ownership of workflow and customer data is crucial for monetising large AI models such as Claude, OpenAI and ChatGPT. Serko AI’s beta launch is cited as an example, with Gordon suggesting its vertical travel relationships and data could attract corporate interest over time.
Turning macro, Gordon states New Zealand’s OCR at 2.25% is likely at the bottom of the cycle, with markets now pricing a July hike and possibly up to three moves this year. He observes cost-push, not demand-driven, inflation and a visibly slowing economy, flagging particular pressure on diesel-reliant farmers despite currently strong dairy pricing.
