The global share market continued its upward trajectory over the month, fuelled by the release of higher-than-expected earnings. It recovered the losses in September, ending the month at an alltime high. Meanwhile, the Reserve Bank of New Zealand (RBNZ) was a standout during the month, being one of the first developed market central banks to start hiking interest rates. The official cash rate (OCR) was increased from 0.25% to 0.50% and New Zealand government bond yields notched higher in response to this announcement. While strong earnings reports supported the market rebound, the gain was solidified by an increase in U.S. consumer confidence. U.S. job creation underperformed, however, with nonfarm payroll data below the consensus estimate. Additionally, the US debt ceiling was reinstated, and the Senate passed a bill to temporarily raise the ceiling until early December. Reported earnings were not favourable for all the tech giants, with Amazon and Apple missing earnings and revenue expectations, as economic reopening drove consumers back to physical stores and global supply chain constraints continue to challenge these companies. During the month, Tesla joined the ranks of the trillion-dollar market cap club. Tesla now holds a market cap larger than the next 8 largest car manufacturers combined, representing about 35% of the global automotive sector market capitalisation. New Zealand, and notably Auckland, remained in lockdown throughout the month as the country transitioned away from an elimination strategy, following a global trend towards “learning to live with” Covid. In contrast, China enforced another zero-tolerance restriction over several cities. These restrictions, among others across Asia, are expected to exacerbate global supply chain problems. Meanwhile, oil prices continued to rally as demand outstripped supply.
Source: Refinitiv Datastream, Makao Investments
Global shares markets rebounded strongly, continuing their good annual
performance relative to the last 20 years. However, the New Zealand share market lost some ground in October, significantly underperforming global shares for the month. Performance for NZ shares remains far behind global markets over the last twelve months. Yields rose on New Zealand bonds during the month, amid the OCR hike to 0.5%, resulting in a negative 3% return. Global bonds, however, had a very slight negative return for the month, demonstrating New Zealand’s differing stance on monetary policy. The 12-month return on NZ fixed income represents the worst annual return for investors over the last 20 years.
New Zealand Shares
Having experienced strong performance in the third quarter, Mainfreight (MFT) gave back some gains in October. During the month, the head of the New Zealand operations announced his resignation. The stock remains a star performer over the last 12 months, however. Infratil (IFT) lost ground over the month ahead of the completion of the sale of a majority stake in the windfarm operator, Tilt Renewables. The stock mostly recovered these losses in early August, however, when the formal announcement was made.
Spark New Zealand (SPK) fell over the month amid merger talks between 2degrees and Orcon, which could see competition increase for broadband services in New Zealand.
Infratil (IFT) kicked off the month with its share price moving higher amid announcements that the company was funding new projects, including a majority stake in Auckland Radiology Group and a minority stake in Kao Data, a London data centre business.
A2 Milk (ATM) surged mid-month on reports that disruption to the daigou channel, a key sales
channel to China, had improved. This was seen as a potential positive development for their infant milk powder products. Later in the month A2 Milk held their company investor day for 2021, and the stock gave back some earlier gains, closing the month 2.2% higher.