Key market movements - September 2020

The third quarter of 2020 continued with heightened levels of uncertainty and volatility across markets, albeit significantly reduced than levels experienced in the first half of the year. There was a wide dispersion of returns across nations, industries and asset classes as capital markets continued to price in changing prospects at a global level, as well as the potential firm specific ramifications.

In 2020 we have been reminded to expect the unexpected and with Covid-19 still impacting all nations and economies, uncertainty and volatility will likely remain heightened for some time.


International shares

+6.6% (hedged to NZD)

+5.4% (unhedged)

International shares were generally positive in the third quarter, although it was anything but a clean sweep. The US market was very strong, as the accommodative monetary policy from the central bank continued to support businesses through the Covid induced recession. A positive factor for the US was its share market composition, which includes a higher than average allocation to technology companies which have been relative beneficiaries of the Covid-19 crisis. The S&P 500 Index (total returns in USD) advanced +8.9% for the quarter and is now up +5.6% for the year.

In Europe, the performance was more subdued and, in aggregate, the region was flat for the quarter. Covid-19 infection rates rose sharply in some nations and the rate of economic recovery was not as rapid as that observed across the Atlantic. For the quarter, the MSCI Europe ex UK Index gained +1.8% but remains down -7.4% year to date (in local currency).

Britain continued to struggle, with infection rates remaining high and the tightening of social restrictions impacting economic activity. Risks of a messy Brexit were again raised, as the end of year deadline for new rules regarding the UK-EU relationship approaches, with seemingly little progress made. In GBP terms, the FTSE 100 declined -4.0% for the quarter and is still down -20.2% year to date. Japanese equities were robust with the MSCI Japan Index advancing +4.7%, improving its year to date return to -3.2%.

In New Zealand dollar terms, the MSCI World ex-Australia Index delivered a quarterly return of +6.6% on a hedged basis and +5.4% unhedged. Year to date, this asset class is now near flat with the hedged index down -0.3% and the unhedged index up +3.8%.

Source: MSCI World ex-Australia Index (net div.)


Emerging Markets shares


The Emerging Markets asset class led the way in the third quarter, with the MSCI Emerging Markets Index advancing +8.8% and returning year to date performance into the black at +2.9% (gross dividend in local currency). Chinese, Taiwanese and South Korean equities were among the best performers, as the technology heavy composition of these markets has meant they have been relative beneficiaries of this particular crisis.

Geopolitical issues were still prevalent. There is ongoing US-China tension (including President Trump banning US firms from doing business with TikTok), and the May/June Himalayan border dispute between China and India remains unresolved.

Weakness in oil prices stymied returns from significant oil exporting economies such as Russia and Brazil.

In unhedged New Zealand dollar terms, the MSCI Emerging Markets Index produced a quarterly return of +7.0%, for a +0.8% year to date return.

Source: MSCI Emerging Markets Index (gross div.)


New Zealand shares


Despite the New Zealand stock exchange suffering persistent interruptions from cyberattacks, our domestic equity market delivered a handy +2.9% through the quarter and is now positive year to date at +2.8%.

In contrast to the first two quarters of the year, it was the small and mid-cap firms that outperformed while the two largest names faltered. a2 Milk fell by over -20% through the quarter as an earnings update saw a downward revision in earnings due to disruption in direct to visitor sales due to the border closure.

Fisher & Paykel has seen increased demand for their breathing aids which helped the company’s share price soar through the crisis. This quarter, however, saw some consolidation with the company returning -6%.

The delay in the New Zealand election continues to mean an ongoing lack of clarity for the future of the Tiwai Point aluminium smelter, and the potential for this large consumer of electricity to remain operational for longer helped support the utilities sector (Meridian: +5.2%, Mercury: +10.5%, and Contact: +9.9%).

Tourism related firms Tourism Holdings (+12.1%) and Auckland Airport (+10.9%) were up, while Air New Zealand (+3.8%) was relatively more reserved.

The Reserve Bank of New Zealand’s (RBNZ) signalling of a likely reduction in interest rates (and therefore borrowing costs) supported the property market and the listed New Zealand real estate companies enjoyed a strong quarter after lagging through the first two. The listed real estate index advanced +13.4% in the quarter, but is still down-3.4% year to date.

Source: S&P/NZX 50 Index (gross with imputation credits)


Australian shares


After leading the recovery during the second quarter, the Australian share market was subdued with the S&P/ASX 200 returning -0.4% in Australian dollar terms, leaving its year to date performance at -10.8%. Small capitalisation companies outperformed their larger counterparts.

The financial sector was weak while the materials sector was mixed with most firms flat. Fortescue Metals Group was a highlight advancing +24.9% thanks in part to strong demand for iron ore from Chinese steel makers.

Melbourne was forced to endure a fresh round of prolonged lock down measures following a second Covid-19 outbreak. In part, this would have contributed to strength in the consumer discretionary sector, with Domino’s Pizza, JB Hi Fi and Harvey Norman enjoying a good quarter.

Returns to New Zealand investors were enhanced by a relatively strong Australian dollar over the quarter.

Source: S&P/ASX 200 Index (total return)


International fixed interest


The international fixed interest market was relatively quiet with central bank support holding yields low and stable.

Corporate bonds continued their trend of recovery from the second quarter, with increased economic activity and central bank support reducing the likelihood of widespread corporate default.

In aggregate, corporate bonds outperformed higher quality sovereign bonds, and longer duration bonds outperformed shorter duration bonds. The FTSE World Government Bond Index 1-5 Years (hedged to NZD) posted a +0.2% gain to take its year to date return to +3.0%, while the broader Bloomberg Barclays Global Aggregate Bond Index (hedged to NZD) returned +0.7% for the quarter, for a +4.5% year to date return.

Source: FTSE World Government Bond Index 1-5 Years (hedged to NZD)


New Zealand fixed interest


The New Zealand fixed interest market delivered more price action than was generally seen in global markets, with the 10 year New Zealand government bond yield pushing lower to close the quarter at 0.53% - down from 0.96% at the beginning of the quarter.

Although the Official Cash Rate (OCR) was held at 0.25% at the August and September meetings, these announcements were accompanied by strong signals from the RBNZ of interest rate reductions in the short to medium term.

The decline in local bond yields was positive for bond prices, resulting in a +1.7% return for the S&P/NZX A-Grade Corporate Bond Index over the quarter, taking the year to date return to +6.5%.

Source: S&P/NZX A-Grade Corporate Bond Index


Table 1: Asset class returns to 30 September 2020

Asset Class Index Name 3 months 1 year 3 years 5 years 10 years

New Zealand shares

S&P/NZX 50 Index
(gross with imputation credits)






Australian shares

S&P/ASX 200 Index (total return)






International shares

MSCI World ex Australia Index
(net div., hedged to NZD)






MSCI World ex Australia Index (net div.)






Emerging markets shares

MSCI Emerging Markets Index (gross div.)






New Zealand fixed interest

S&P/NZX A-Grade Corporate Bond Index






International fixed interest

FTSE World Government Bond Index 1-5 Years (hedged to NZD)






New Zealand cash

New Zealand One-Month Bank Bill Yields Index






Unless otherwise specified, all returns are expressed in NZD. We assume Australian shares and emerging market shares are invested on an unhedged basis, and therefore returns from these asset classes are susceptible to movement in the value of the NZD. Index returns are before all costs and tax. Returns are annualised for time periods greater than one year.


For a detailed review of the market commentary for the quarter, see ‘Market commentary - September 2020’ or click here to view the full newsletter in PDF.



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