In case you were too busy making IT-related pranks on your friends, you should know that New Zealand will hold elections this weekend.
For newbies out there, you should know that traders pay close attention to elections because elected leaders – when they’re not busy threatening fire and fury on other nations – are responsible for fiscal stimulus and other policies that might affect factors such as business sentiment and employment conditions.
So, what can you expect from this weekend’s events? Here’s a quick 411 for you:
Tomorrow (September 23) New Zealanders will head to the polls to elect its 52nd Parliament.
Remember that New Zealand uses a Mixed Member Proportional (MMP) voting system wherein voters get to pick one political party (list) and one local candidate (electorate).
This means that the only way a political party can get a seat on the House of Representatives is to (a) get at least 5% of the total party votes or (b) get their members elected as electorates.
This year, 71 seats are open to electorates while political parties can fight over 49 list seats.
Polls will open from 9:00 AM to 7:00 PM local time and, thanks to new electoral rules, polls could start officially counting votes as early as 9:00 AM (from 2:00 PM) though we probably won’t see the official preliminary results until 7:00 PM.
Who are the main players?
National Party: The centre-right party, led by Prime Minister Bill English, has been winning the game of thrones since 2008 and has held office for more years than any other party. They won 60 seats in the 2014 election and entered into agreements with ACT, United Future, and Māori Party to form a coalition.
Over the past years National has focused on promoting stability with limited spending, moderate tax reforms, and trade agreements with the private sector.
Labour Party: The New Zealand Labour Party is the oldest party in existence and is currently led by Jacinda Ardern. It generally leans towards democratic socialism and, with its 32 seats, functions as the official opposition.
Since the 90’s Labour has pushed for policies that would take advantage of the state’s power to promote “equal access” to property and cultural and political spheres.
Green Party: The Green Party of Aotearoa New Zealand is a left-wing party – headed by James Shaw – has mostly focused on environmental issues such as mining, climate change, and GMOs. While a relatively small fish, their relative popularity (14 seats from the 2014 elections) could make or break a government in case a party doesn’t get majority.
NZ First: The New Zealand First is a populist party that leans towards protectionism and nationalism. Its leader, Winston Peters, has formed coalition governments with both the Nationalist and Labour Parties. Much like the Green Party, NZ First’s small but significant numbers are attractive enough to get coalition invites.
What are the odds?
The Newshub Reid Research poll – conducted between September 13 and 20 – puts the National party at 45.8% with the Labour Party behind at 37.3%.
Since neither party can get majority, eyes are turning to the Green Party (7.1%) and NZ First (7.1%) as possible king(or queen)makers in the game.
The numbers aren’t set in stone, though. Thanks to recent leadership changes in the Labour, Green, and United Future parties, the odds have tightened more uncomfortably for the National Party than in the previous elections.
How can market players react?
Based on how Kiwi has reacted to poll results in the past couple of days, traders have associated a National Party win with stability and continuation.
However, more and more market players are saying that a Labour win, while a bit more uncertain, won’t be so bad either. In fact, unless there’s major drama from the election results, it’s more likely that Kiwi’s price action could go back to being influenced by global catalysts and economic data right after the elections.
Tips and Tricks:
Even though this weekend’s events aren’t as exciting as the EU referendum or the U.S. elections, we could still see plot twists that would induce large weekend gaps and/or inspire sharp moves that would kick you out of a position.
Take care to protect your trading account. If you’re really confident about your current positions, then you can limit your potential losses with stops (though they might not work in case of really large weekend gaps).
Also consider staying in the sidelines until you can make an informed decision about the election results. No position is position, after all! But whichever strategy you use, make sure you remember that trading is a marathon and not a sprint. Prioritize getting to trade for another day than the promise of quick pips.