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AMP KiwiSaver Scheme performance update – July

Markets in July performed well

Global markets performed reasonably well in July, which left world equities with an impressive gain of 18.1% for the first seven months of 2019.

New Zealand and Australian share markets continued to track world markets and as at the end of July, both markets were up by more than 23% in 2019. NZ Listed Property continued to respond to the expectation of lower domestic interest which boost the attractiveness of higher yielding companies in the New Zealand market. Investors also sought out the more defensive characteristics of the commercial property sector.

With inflation low and Central Banks making market-friendly signals, bonds continued their good performance.

These positive returns from the majority of markets lifted KiwiSaver performance. Given the strong first half for returns, we expect more restrained gains and volatility in the second half year of the year. As August began, the US/China relationship deteriorated markedly with the US adding additional tariffs and labelling China a “currency manipulator” for the first time. This led to a sharp fall in shares and although it is based on politics more than fundamentals, for now we consider downside risks to be elevated and have raised our Cash levels accordingly.

It’s important to remember that KiwiSaver is a long-term savings plan and funds will go up and down.

If you would like more information or to discuss whether you’re in the right fund to suit your savings needs, please talk to your Adviser or call us on 0800 267 5494.

How do the latest returns compare to the average term deposit?

Compared to the average return on the average term deposit for 1 year of 3.37% and 5 years of 5.53% (offered by the major banks in New Zealand on 3 August 2018 and 1 August 2014 respectively), the returns for some of our key funds were:

 

Fund type

Annual return (1 year) *

Average annual return (5 years)**

AMP Growth Fund

8.02%

7.68%

AMP Balanced Fund

7.51%

6.68%

AMP Moderate Fund

6.77%

5.49%

*31 July 2018 - 31 July 2019
**31 July 2014 - 31 July 2019

These returns are after total fund charges and before tax and are calculated based on unit price movements adjusted by total fund charges and tax credits and including a full allowance of any foreign tax credits.

You can view returns for all the AMP KiwiSaver Scheme funds here.  

If you have any questions you can talk with your Adviser or call us on 0800 267 5494.

Detailed commentary

Global markets performed reasonably well in July, with the MSCI World index (in local currency) returning 1.2% over the month. This left world equities with an impressive gain of 18.1% for the first seven months of 2019. Having lost momentum with rising trade war related nervousness, markets were hoping for clear US Federal Reserve interest rate cuts. While the Fed did cut rates 0.25% at the very end of the month, markets were disappointed that their rate reduction hadn’t been larger, and began to slip in value. This coincided in early August with a worsening in trade tension between the US and China, with the resulting recriminations hitting markets hard as August began. However, having performed unusually strong in the early part of the year, global shares still have a reasonable buffer for the developing correction.

New Zealand and Australian share markets continued to track world markets, delivering July returns of 3.4% and 2.9% respectively. As at the end of July, both markets were up by more than 23% in calendar 2019. NZ Listed Property continued to respond to the expectation of lower domestic interest which boost the attractiveness of higher yielding companies in the New Zealand market and investors also sought out the more defensive characteristics of the commercial property sector. With a 3.3% July gain, the NZ Property Index ended July as the strongest of the asset classes in 2019 to date, with an exceptional 25.6% increase. Global Property and Infrastructure stocks lagged in July and were little changed for the month, though in 2019 they have gained 15.2% and 16.9%, respectively, through to month-end.  

The NZ dollar slipped back slightly in July with a -1.1%% loss against the MSCI World currency basket. The NZ dollar was unchanged during the month versus the Australian dollar, though it is very slightly stronger year-to-date, gaining 0.5%. This reflects the Reserve Bank of Australia’s cutting interest rates to 1.0% while the Reserve Bank of New Zealand only cuts rates in early August. With inflation low and Central Banks making market-friendly signals, bonds continued their good performance. NZ Bonds, the Global Aggregate and Global Treasuries all gained 0.7% in July and have now rallied by close to 6.0% in 2019.

These positive returns from the majority of markets lifted KiwiSaver performance, but we expect more restrained gains and volatility in the second half year, given the strong first half. As August began, one risk that we highlighted last month - that a US/China trade deal may not be concluded any time soon - came to pass, and relationship deteriorated markedly with the US adding additional tariffs and labelling China a “currency manipulator” for the first time. This led to a sharp fall in shares and although it is based on politics more than fundamentals, for now we consider downside risks to be elevated and have raised our Cash levels accordingly.

A disclosure statement is available on request and free of charge from your Adviser.

*Please note past returns are not indicative of future returns. For more information, download a copy of the AMP KiwiSaver Scheme Product Disclosure Statement and Fund Update Booklet, which have been lodged on the Scheme's offers register entry at companiesoffice.govt.New Zealand/disclose. AMP Wealth Management New Zealand Limited is the issuer and manager of the AMP KiwiSaver Scheme (the 'Scheme'). The Supervisor of the Scheme is The New Zealand Guardian Trust Company Limited.

Important information

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AMP Wealth Management New Zealand Limited is the issuer and manager of the AMP KiwiSaver Scheme (the 'Scheme'). The Supervisor of the Scheme is The New Zealand Guardian Trust Company Limited.

Please note past returns are not indicative of future returns.

For more information, download a copy of the AMP KiwiSaver Scheme Product Disclosure Statement and Fund Update Booklet, which have been lodged on the Scheme's offers register entry at companiesoffice.govt.nz/disclose.

The information included in this article is of a general nature and is not a substitute for financial or other professional advice. To the extent that the information constitutes advice, it is class advice only. Before taking any action, you should always seek financial advice or other professional advice relevant to your personal circumstances. For personal financial advice, we recommend you contact your Adviser or if you don't have an Adviser, contact us on 0800 267 263 and we can put you in touch with one. 

A disclosure statement is available from your Adviser, on request and free of charge.