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Performance update – October

Markets in October have picked up but remain fragile

Global share markets have picked up in October despite the continued uncertainty around trade. Despite a range of political uncertainties in Hong Kong and Taiwan both these markets rallied with gains greater than 4% for the month indicating an improvement in the outlook for trade in the Greater China region. Trade tensions between US and China have eased with a first stage trade deal being indicated.

The Australian and New Zealand share markets had a poorer month by comparison. However, the Australian share market is still on track for a great year with a 23.5% gain for 2019 to date and the NZ share market is close behind, achieving a 22.5% year-to-date gain. Overall the improved outlook led global shares to gain 2.6% this month.

The NZ dollar and Australian dollar have both gained value over the month against the US dollar leaving the NZ-Australian exchange rate only 0.1% higher for the month.

Demand for NZ government bonds has increased since the Reserve Bank interest rate cut in August, which has caused the New Zealand bond interest rates to rise.

Despite some uncertainties in the China region, the global markets and bond markets help to improve overall returns thus showing the benefits of having well-diversified investment portfolios.

It’s important to remember that the AMP KiwiSaver Scheme and the New Zealand Retirement Trust are long-term savings plans 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. Past performance is not indicative of future returns.

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 3.36% and 5 years of 5.47% (offered by the major banks in New Zealand on 26 October 2018 and 31 October 2014 respectively), the returns for some of our key funds for the AMP KiwiSaver Scheme were:

Fund type

Annual return (1 year) *

Average annual return (5 years)**

AMP Growth Fund

13.64%

7.71%

AMP Balanced Fund

11.70%

6.63%

AMP Moderate Fund

9.45%

5.38%

*31 October 2018 – 31 October 2019
**31 October 2014 - 31 October 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.
You can view returns for all the NZ Retirement Trust Returns here.

Detailed commentary

Despite continuing uncertainty around trade and mixed macroeconomic data, Global and Asian equities rallied in October. Japanese equities led the way up, gaining 4.8% on the month. Despite protests and political unrest, Hong Kong managed a 4.4% October gain, and Taiwan rallied 5.2%, indicating an improvement in the (still fragile) outlook for trade in the Greater China region. These gains reflect a better mood overall in Emerging Markets, which gained 4.0% for the month. US equities likewise strengthened, gaining 2.2% in October, as corporate earnings were somewhat better than expected and trade tensions eased with a “First Stage” trade deal between the US and China being indicated by President Trump. European shares strengthened by 1.4% as the European Central Bank re-affirmed its easy-money policy and the leadership moved from Mario Draghi to Christine Lagarde, as of 1 November.

Overall, the brighter mood led Global equities to log a 2.6% monthly gain. Australian and New Zealand equities struggled by comparison, as no distinguishing good news in Australasia was available to boost sentiment. The S&P/ASX 200 was little changed, with a -0.4% return while the S&P/NZX 50 Gross Index dropped -1.3%, although the NZ Index is still just 3% below its record high set in early September. Australian equities are still on pace for their best year since 2009 with a 23.5% rally in 2019 to date, while NZ shares are close behind, having logged a 22.5% year-to-date gain to the end of October.

The NZ dollar reversed some of its recent weakness in October, having reached a low point of USD 0.62 on the first day of the month, the kiwi dollar gained more than 2% against the US currency and closed the month at USD 0.64. The Australian dollar was comparably strong against the US dollar during October, leaving the NZ-Australian exchange rate only 0.1% higher for the month. October saw New Zealand bond interest rates rose fairly sharply from their new-record lows, with yields moving up from 1.09% on the 10-year Government bond to 1.31%. The yield jump of 0.3% was more exaggerated in New Zealand than was seen in the US, where the 10-year yield rose by just 0.1% -from 1.66% to 1.77% - during the month. That difference mainly reflected the excessively low yields in NZ that investors had delivered, given strong demand for bonds following the large Reserve Bank interest rate cut instituted in August.

Despite some uncertainties in the China region, the global markets and bond markets help to improve overall returns thus showing the benefits of having well-diversified investment portfolios in KiwiSaver.

*Please note past performance are not indicative of future performance.

Important information

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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.

AMP KiwiSaver Scheme

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.

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.

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

New Zealand Retirement Trust

For more information, download a copy of the NZRT Product Disclosure Statement (Workplace or Personal sections) and Fund Update Booklet. AMP Wealth Management New Zealand Limited is the issuer and manager of the New Zealand Retirement Trust. The Supervisor of the Scheme is the New Zealand Guardian Trust Company Limited.