Key market movements - September 2023

After a generally good performance over the first half of 2023, international share markets gave up some of their gains in the July to September quarter.

Slowing growth and the prospect of a sustained period of higher interest rates in the US weighed on the influential American share market, with the so called “magnificent seven” large technology-related businesses mainly declining.

Despite production cuts from Saudi Arabia and Russia contributing to a significant rise in oil prices, there was better news on the inflation front, with year-on-year core inflation measures continuing to ease across most economies. This allowed many major central banks to indicate a pause in their rate hiking programmes.

In August, Fitch Ratings downgraded the US's AAA sovereign credit rating to AA+, citing the growing US debt burden and an "erosion of governance" as reasons for its decision. This, combined with market expectations for interest rates to remain higher for longer, contributed to higher yields (lower bond prices) over the quarter.


International shares

-2.5% (hedged to NZD)

-1.2% (unhedged)

US and Eurozone share markets stumbled in the third quarter as interest rate concerns contributed to a weakening of investor sentiment. In the US, the concern was that interest rates would stay elevated for longer than initially expected, while in the Eurozone it was a concern about the impact recent rate hikes might have on economic growth.

Energy companies provided one of the few bright spots in the quarter. The information technology sector was one of the weakest over the quarter, with higher interest rates generally being negative for the valuation of many of these companies.

The UK share market rose over the quarter. The large, diversified energy and basic materials groups outperformed as they rebounded from weakness in the prior three month period. A weaker British pound (versus the US dollar) provided support, and a sharp recovery in crude oil prices buoyed the energy groups.

Against most major currencies, the New Zealand dollar was a little weaker through the quarter, which meant increased reported returns for investors holding unhedged foreign assets.

The MSCI World ex-Australia Index returned -2.5% for the quarter hedged to the New Zealand dollar and -1.2% for the unhedged index.

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


Emerging markets shares


Despite a strong start, the emerging markets recorded a negative return over the third quarter, declining by -2.8% in US dollar terms.

The Chinese share market experienced a sharp decline in August, with the country’s property sector faring particularly badly as investors doubted Beijing will deliver enough stimulus to get the world’s second largest economy back on track.

In Poland, political uncertainty ahead of October’s parliamentary elections prompted an unexpected interest rate cut that was poorly received. This contributed to Poland posting the largest decline amongst the index markets. Taiwan and Korea were also notably weak in a quarter where technology companies generally struggled.

Hungary and the Czech Republic both gained and outperformed the index, while the best returns came from Egypt and Turkey. In Turkey, two interest rate rises in the quarter were viewed as a sign the central bank may be becoming more orthodox in its policy approach, which was well received by the market.

While it was a negative quarter for the underlying emerging markets group, the slightly weaker New Zealand dollar helped contribute to a near flat return to unhedged investors. The MSCI Emerging Markets Index produced a quarterly return of -0.5% in unhedged New Zealand dollar terms.

Source: MSCI Emerging Markets Index (gross div.)


New Zealand shares


The New Zealand share market, as measured by the S&P/NZX 50 Index, underperformed international markets over the quarter by delivering a -4.8% return. While a number of small companies outside the top 50 performed strongly, several of the more ‘index-relevant’ names didn’t fare quite so well.

From within the top 50, Ampol Ltd (owners of Z Energy) and Winton Land Ltd (a residential neighbourhood developer) both delivered near +20% returns for the quarter. Both companies benefited from strong earnings announcements, with Ampol’s half year sales volumes up 24% and Winton announcing record revenue and profits.

Unfortunately, losers outnumbered winners on the NZX this quarter.

Of the more notable firms, Restaurant Brands NZ Ltd (franchise owner for KFC, Pizza Hut, Carl’s Jr and Taco Bell) projected weaker than expected profitability due to ongoing global inflationary pressures, particularly in regard to rising ingredient and wage costs. Restaurant Brands shares slumped -31.2% over the quarter.

The a2 Milk Co Ltd also slid for the third successive quarter, shedding a further -14.8%. While the firm met the lower end of its guidance for double digit revenue and earnings growth, it warned the key China market will be more challenging this year with China’s birth rate at a record low. The infant formula producer flagged prices will remain under pressure due to an increase in competition, excess manufacturing capacity and challenging macroeconomic conditions.

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


Australian shares


The Australian share market (S&P/ASX 200 Total Return Index) registered a small loss in the third quarter, falling -0.8% in Australian dollar terms.

Although numerous micro-cap basic materials firms and technology companies posted stellar gains, these had a negligible impact on the performance of the overall market.

In line with trends overseas, it was the energy sector which profited the most on the back of a strengthening oil price. Large capitalisation firms like Woodside Energy (+9.6%), Santos Ltd (+6.8%) and Origin Energy Ltd (+6.8%), along with a host of strong returns from much smaller energy firms, saw the energy sector overall deliver an average +11.2% for the quarter. With mega-cap basic materials firms BHP and Rio Tinto also both eking out small gains of +1.1% and +1.3% respectively, this helped the wider Australian share market navigate a difficult quarter with minimal downside.

In contrast, healthcare, consumer staples and information technology sectors all struggled and helped tip the overall index into the negatives. Notable underperformers included software infrastructure firm Block Inc (-28.7%) which suffered from weaker investor sentiment, and medical equipment company ResMed Inc (-27.8%) as their annual earnings fell short of analyst expectations.

While the local Australian index only recorded a small loss, the slightly weaker Australian dollar versus the New Zealand dollar over the quarter meant that reported returns to unhedged New Zealand investors reduced further to -1.9%.

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


International fixed interest


In spite of a significant rise in oil prices, signs of easing core inflation measures across most economies allowed many major central banks to indicate a pause in further interest rate hikes.

Both the US Federal Reserve and the European Central Bank (ECB) raised interest rates in July by 0.25%, with the latter continuing to hike again in September. The ECB suggested that this might now be sufficient to guide inflation back to its target. The Bank of England raised its base rate to 5.25% in August.

However, despite the Federal Reserve and the Bank of England both keeping their benchmark interest rates steady in September, the markets began to anticipate a longer period of elevated interest rates. This was the key driver of increasing bond yields (meaning lower bond prices) over the period.

Over the quarter, the US 10 year bond yield trended steadily higher from 3.84% to 4.58%, with the two year bond yield moving from 4.90% to 5.05%, lessening the degree of inversion in the US yield curve. Germany’s 10 year bond yield also rose from 2.39% to 2.84%, while the UK 10 year yield adjusted only slightly from 4.39% to 4.50% with the market heartened by signs of slowing inflation.

The FTSE World Government Bond Index 1-5 Years (hedged to NZD) returned +0.6% for the quarter, while the broader Bloomberg Global Aggregate Bond Index (hedged to NZD) declined -1.8% due largely to the longer average term of this index.

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


New Zealand fixed interest


Having raised interest rates faster throughout 2022 than all major economies, the Reserve Bank of New Zealand (RBNZ) was also first to hit the pause button, with our last interest rate rise coming in May 2023. Over recent months, successive Official Cash Rate (OCR) announcements on 12 July, 16 August and 4 October, all maintained interest rates at the prevailing level of 5.50%.

In its October release, the RBNZ noted that, although employment is still above its maximum sustainable level (one of the factors driving domestic or non-tradables inflation), recent indicators showed employment intentions are flat and the difficulty finding labour within the economy has reduced. Although the range of factors impacting inflation are many and varied, the RBNZ still anticipates inflation declining to within its 1% to 3% target range by the second half of 2024.

Similar to overseas trends, New Zealand government bond yields also rose during the quarter, with the New Zealand 10 year bond yield increasing from 4.65% to 5.34% by 30 September. With the June quarter gross domestic product figures confirming that New Zealand had exited its technical recession, as expected, New Zealand corporate bonds outperformed government bonds over the period.

The S&P/NZX A-Grade Corporate Bond Index fell -0.5% for the quarter, while the longer duration but higher quality S&P/NZX NZ Government Bond Index fell -2.8%.

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



Table 1: Asset class returns to 30 September 2023

Asset class Index name 3 months 1 year 3 years 5 years 10 years

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 shares

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






Australian shares

S&P/ASX 200 Index (total return)






International fixed interest

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






Bloomberg Global Aggregate Bond Index (hedged to NZD)






New Zealand fixed interest

S&P/NZX A-Grade Corporate Bond Index






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 markets 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 2023'


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