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Speaker 1: Michael Luke Milford Asset Management is with US high Michael, So,

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Speaker 1: how's our share market faring? You know with the surround war.

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Speaker 2: So the New Zealand share market's down about three percent

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Speaker 2: so far this month, you know, with the Iron conflict

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Speaker 2: and straight of Hamou's disruption. It's fair to say it

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Speaker 2: is really weighing on sentiment and heading our share market

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Speaker 2: in a few different ways. Firstly, there's a direct impact

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Speaker 2: of higher oil and higher fuel prices as well as

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Speaker 2: some of the unsetenty around fuel supply. Then you have

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Speaker 2: the indirect effects flowing through the economy, such as higher

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Speaker 2: inflation risk, the potential impact on interest rates, and I

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Speaker 2: think general confidence taking a bit of a ht. So

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Speaker 2: our share market is trying to price all that and.

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Speaker 1: Right now, obviously there will be some companies that are

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Speaker 1: more directly impacted by the higher fuel prices than others, right.

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Speaker 2: Yeah, So it's really those travel and transport companies that

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Speaker 2: have been hit the hardest. As you'd expect now in

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Speaker 2: New Zealand's share price has fallen about twenty percent so

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Speaker 2: far this month. And then one of the company's likely

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Speaker 2: most exposed now while they have largely hedged their oil

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Speaker 2: price exposure. They are not hedged to the crack spread

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Speaker 2: or basically the costs are to an oil into jet fuel,

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Speaker 2: which has risen significantly. Now the price of jet fuel

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Speaker 2: is actually roughly doubled this year. While the company in

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Speaker 2: New Zealand, while they've reduced some flights and increase fares,

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Speaker 2: this will likely have a greater impact in the short

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Speaker 2: term if the companies to spending their earnings guidance. If

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Speaker 2: you look at other travel companies like Aukland Airport, now

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Speaker 2: THEIRS share prices are down about eight percent this month.

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Speaker 2: They will have some impact from a New Zealand cutting

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Speaker 2: back on some flights, but the bigger impact for Aukland

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Speaker 2: Airport would be if there's a bigger softening I guess

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Speaker 2: in demand for international travel in this environment. And then

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Speaker 2: if you go look at some of our transport companies

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Speaker 2: like Freightways, which owns New Zealand couriers. Now there's share

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Speaker 2: price is down about seven percent this month. Actually, transport

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Speaker 2: companies like Freightways they generally have a type of fuel

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Speaker 2: sew charge mechanisms so they can us that through. But

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Speaker 2: I guess if you end up with higher prices that

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Speaker 2: could impact demand. Now, I think the real impact are

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Speaker 2: really be those companies that are being hit by these

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Speaker 2: high fuel prices that don't have the ability to pass

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Speaker 2: that on due to fixed prices or some other mechanism.

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Speaker 1: And what do you think of the broader implications for

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Speaker 1: the economy.

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Speaker 2: So I think there are a few things i'd highlight. First,

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Speaker 2: there's really the impact on inflation and interest rates. So

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Speaker 2: if oil prices do stay elevated, that would create inflationary

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Speaker 2: pressure as oil ultimately feeds into the price of everything. Now,

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Speaker 2: that could put up upwards pressure on interest rates over time.

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Speaker 2: And we've actually already seen some of this price then

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Speaker 2: with New Zealand wholesale interest rates increasing over the month,

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Speaker 2: and that saw a couple of the banks increase mortgage

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Speaker 2: rates today. The second thing I'd highlight is just the

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Speaker 2: impact on consumer sencement. Now with increase in fuel prices,

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Speaker 2: consumers might have to watch their spending or lock to

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Speaker 2: cut back elsewhere. And I think it's fair to say

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Speaker 2: it's been a tough few years for the New Zealand

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Speaker 2: economy and we've only just started to see some signs

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Speaker 2: of improvement. But if you have kind of weaker confidence

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Speaker 2: and higher inflation fares, there is a risk that temper

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Speaker 2: is that slightly the I guess, you know. Putting it

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Speaker 2: all together, I think the overall overall impact on our

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Speaker 2: economy and global share markets will ultimately come down to

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Speaker 2: how long it takes for this conflict to be resolved

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Speaker 2: and how long it takes for the strait to reopen.

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Speaker 2: If this is short and the earnings impact for most

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Speaker 2: of our companies would actually be quite small, but if

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Speaker 2: it becomes extended, it becomes a larger risk.

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Speaker 1: Yeah, hey, Michael, thank you. That's fascinating. I really appreciate

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Speaker 1: It's Michael Luke, Milford Asset Management.

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