Key market movements - September 2025

International shares

+7.5% (hedged to NZD)

+12.9% (unhedged)

 

Developed markets posted robust returns underpinned by strength in the technology sector, easing monetary policy and progress on US trade deals. 

US markets continued to climb, with easing monetary policy and strong corporate earnings improving sentiment toward risky assets, evidenced by small, momentum and growth factors outperforming throughout the quarter. Gains were concentrated in the Information Technology and Communication Services sectors, underscoring the impact of the AI boom on the equity market. Economic data releases were also constructive for markets, with second quarter GDP revised higher and strong consumer spending through the September quarter. Progress on trade deals through August further strengthened sentiment.

The Japanese share market posted double digit gains, propelled by structural reform and growing confidence in an earnings recovery. Cyclical sectors outperformed, while materials, energy and semiconductor shares benefited from the global AI boom.

European equities made gains through the quarter, though lagged the broader market. Germany and France dominated headlines. A -0.3% contraction in German GDP sparked recession fears and weak earnings from automakers Volkswagen and Porsche further weighed on the DAX, leaving it as the only major index to post a negative quarter. France experienced ongoing political instability, Prime Minister Lecornu replaced Bayrou after a no confidence vote in September, before resigning in early October and being reappointed four days later. The UK outpaced its European peers over the quarter, driven by stock-specific developments in the Healthcare and Defence sectors.

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

 

 

Emerging markets shares

+16.6%

 

Emerging markets (EM) shares had an outstanding quarter, with several key markets delivering over +20% returns. Gains in emerging markets were primarily driven by a weak US dollar, which boosts EM export competitiveness, eases debt burdens and encourages capital flows. Positive investor sentiment around the globe in relation to the AI boom and interest rate cuts from the US Federal Reserve also contributed to EM gains.

Chinese markets roared higher, supported by a weaker USD and positive sentiment. China’s outperformance against the rest of the emerging markets was driven by progress in US-China trade talks, with China offering a USD 1 trillion investment in an attempt to reset US-China trade policies. Structural policy changes designed to combat deflation and continued stimulus measures have also contributed to optimism for the Chinese economy.

India was a notable laggard, one of the only major emerging markets to post a negative quarter. Ongoing concerns over the valuation of the equity market and weaker corporate earnings set the stage for a weak quarter, and the imposition of a 50% tariff by the US on key Indian exports sealed the deal. India has failed to make the same progress on trade deals with the US as other countries.

South Korea and Taiwan both posted strong gains, primarily driven by ongoing strength in the technology sector and the continuation of the AI boom. South Africa doesn’t often feature in our economic commentary, however its place in the +20% club this quarter warrants acknowledgement. Gains were driven by strong precious metal prices. 

Latin American equities posted a strong quarter in aggregate, with the S&P Latin America BMI up +9.5%, however results from individual markets within the region were mixed. The largest markets in the region – Brazil, Mexico and Chile all delivered robust gains, with benchmark indices up +5.0%, +10.0% and +9.0% respectively. Colombia also posted circa +10% returns while Argentina was a significant outlier, with the S&P MERVAL Index falling -11.1%. Latin America was primarily driven by the same factors driving global markets – trade agreements and positive risk sentiment, however lagged the rest of EM due to political uncertainty.

Source: MSCI Emerging Markets Index (gross div.)

 

 

New Zealand shares

+5.8%

 

New Zealand shares moved higher in the third quarter. The NZX 50 Index posted its second-best quarterly result since December 2020 and the index closed the quarter just below its 2021 all-time highs despite a challenging economic environment. 

Local markets benefitted from a more positive global economic outlook, tied to progress on US trade deals and better global growth prospects. The supportive stance from the Reserve Bank of New Zealand (RBNZ), which followed a -0.25% rate cut in August (and an emergency -0.50% rate cut in early October), also buoyed the market. However, share price gains in New Zealand were ultimately limited by lower domestic growth estimates and weakening business confidence.

Small companies significantly outperformed the broad New Zealand market, with the S&P/NZX Small Cap Index up +18.5% for the quarter. Small companies are disproportionately impacted by interest rate changes, so 0.75% of rate cuts and more supportive rhetoric from the RBNZ drove a wedge between the performance of the Small Cap Index versus the broad market.

Heartland Group and Vulcan Steel led the NZX 50 Index this quarter, both up over +30%. Heartland has been rallying since its earnings outlook announcement in August. Other winners include Fonterra, Freightways Group, Stride Property and Channel Infrastructure, all up over +20%. On the other side of the ledger, SkyCity and Ebos Group both fell over -20% through the quarter. 

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

 

 

Australian shares

+10.7%

 

The Australian share market underperformed global equities, posting a +4.7% gain in local currency terms. Small and mid-capitalisation companies outperformed significantly, with the S&P/ASX Small Ordinaries delivering +15.3% and the Emerging Companies Index posting a remarkable +29.6% gain. This can largely be attributed to the higher weight of technology companies in the Australian small and mid-capitalisation indices, which have been performing well, in line with global technology shares. 

Monthly inflation estimates came in much higher than expected, rising from +1.9% year-on-year in June to +3.0% in August. Despite promising signs in global trade, consumer spending and the labour market, there is still significant uncertainty in these areas. There is also risk that the lagged effects of monetary easing could impact the persistence of consumption growth. This uncertainty, paired with elevated inflation led the Reserve Bank of Australia (RBA) to pause interest rate cuts, which the market took as a sign that further cuts were unlikely for the foreseeable future. 

Materials, Utilities and Consumer Discretionary led the Australian market, all up double digits for the quarter. Healthcare fell -9.3% while the rest of the market was relatively flat. 

In the top 50 ASX listed companies, Lynas Rare Earths was up over +100% driven by rising rare earth metal prices and efforts to diversify the rare earth supply chain away from China. Life360 also had a fantastic quarter, up +65.4% driven by strong earnings and a new partnership with AccuWeather. 

With the Australian dollar significantly stronger against the New Zealand dollar over the quarter, the reported returns to New Zealand investors were circa +6% higher than the reported index returns.

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

 

International fixed interest

+0.9%

 

Yields across major markets were mixed, with US 10 Year Treasury yields falling from 4.23% to 4.15% while yields in other major markets such as Australia, Europe and Japan all rose over the period. 

In the US, the balance of risks switched from upside inflation risk to downside growth risk. While inflation rose to +2.9% from Aprils low of +2.4%, the three months to August saw average monthly job gains fall to 29,000, down from 99,000 in the three months to May. As more data was released throughout the quarter, it became evident that the US economy may not be as robust as previously thought. The market had almost completely priced in a rate reduction from the Federal Reserve by the time the Federal Open Market Committee announced its -0.25% cut at the September meeting. 

Evidence that Germany’s defence and infrastructure spending would primarily benefit the domestic European economy and progress on tariff deals with the US led to an improvement in sentiment through Europe. Better growth prospects and confidence in risk assets led to an increase in yields across major economies. France lagged the rest of Europe amid ongoing political turmoil, and Fitch downgraded the nation’s government bonds from AA- to A+ citing ‘political fragmentation’ and a ‘weak fiscal record’.

The FTSE World Government Bond Index 1-5 Years (hedged to NZD) was up +0.7% over the quarter, while the broader Bloomberg Global Aggregate Bond Index (hedged to NZD) rose +0.9%. 

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

 

 

New Zealand fixed interest

+2.9%

 

The RBNZ delivered another -0.25% interest rate cut in August (plus a further -0.50% reduction on 8 October), highlighting the continued economic challenges facing New Zealand.

Lower than expected growth, weakening business confidence and wage growth failing to catch up with CPI inflation over the past several years continue to weigh on the New Zealand economy. The key focus for the RBNZ remains on global and domestic growth fears, as the New Zealand economy’s recovery continues to move slowly, and US trade protectionist policies raise additional risks from abroad. 

On the back of a mixed global bond market, the New Zealand 10-year bond yield was up for the quarter, moving from +4.48% to +4.67%. 

The S&P/NZX A-Grade Corporate Bond Index gained +2.9% for the quarter, while the longer duration but higher quality S&P/NZX NZ Government Bond Index gained +0.8%. 

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

 

Table 1: Investment class returns to 30 September 2025

Investment 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)	+7.5%	+16.7%	+22.5%	+14.3%	+12.5%
	MSCI World ex Australia Index (net div.)	+12.9%	+28.8%	+22.4%	+17.5%	+13.6%
Emerging markets shares	MSCI Emerging Markets Index (gross div.)	+16.6%	+29.5%	+17.4%	+10.4%	+9.5%
New Zealand shares	S&P/NZX 50 Index (gross with imputation credits)	+5.8%	+7.7%	+7.1%	+3.3%	+10.0%
Australian shares	S&P/ASX 200 Index  (total return)	+10.7%	+16.0%	+15.1%	+14.2%	+10.5%
International fixed interest	FTSE World Government Bond Index 1-5 Years (hedged to NZD)	+0.7%	+3.3%	+4.3%	+1.4%	+2.1%
	Bloomberg Global Aggregate Bond Index (hedged to NZD)	+0.9%	+2.1%	+4.6%	-0.1%	+2.4%
New Zealand fixed interest	S&P/NZX A-Grade Corporate Bond Index	+2.9%	+6.5%	+6.6%	+1.6%	+3.4%
New Zealand cash	New Zealand One-Month Bank Bill Yields Index	+0.8%	+3.8%	+4.9%	+3.3%	+2.5%

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 reported 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.