New Zealand shares

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+5.08%

The local market bounced back from a weak final quarter in 2016 to post a strong start to the year. With improving global growth expectations, still supportive credit conditions and renewed strength in overseas equity markets, the New Zealand market enjoyed a very good quarter. Leading performers included Tower Ltd +50.9%, A2 Milk +40.4% and Scott Technology +27.9%, while Fletcher Building informed the market of a $110 million reduction in expected profits and saw its share price fall -18.9% for the quarter. Source: S&P/NZX 50 Index, gross with imputation credits

New Zealand fixed interest

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+1.75%

The Reserve Bank of New Zealand maintained the Official Cash Rate at 1.75% through both its 9 February and 23 March meetings. More importantly, they reiterated they require a high threshold (in future data) before the next rate rise. The market continues to expect the next rate move will not be before 2019. This steady-as-she-goes approach, and a far less threatening international outlook, saw a small rally in the local bond market as it bounced back from a disappointing end to 2016.Source: S&P/NZX A Grade Corporate Bond Index

New Zealand property

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+1.60%

The domestic listed property sector only experienced a small rebound over January to March, an apparent confirmation that the repatriation by many foreign yield-seeking investors last quarter represented more than just a tactical shift. With relatively rich local valuations (most listed entities trade at a premium to their net tangible asset value), and the prospect of improving yield opportunities offshore, the domestic real estate index delivered a useful, if subdued, result. Source: S&P/NZX All Real Estrate Index, gross with imputation credits

Australian shares

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+9.97%

The Australian share market performed well for the second quarter in a row and a weaker New Zealand dollar (versus the Australian dollar) further enhanced returns to New Zealand investors on any unhedged holdings. Large capitalisation companies generally fared the best, with the S&P/ASX 100 delivering +10.23 while the S&P/ASX Small Ordinaries gained +6.45% (both returns in New Zealand dollars). Leading sectors included healthcare companies, utilities and information technology, whilst retail shares struggled as investors anticipated the entry of Amazon into the Australian retail industry. Source: S&P/ASX 200 Index (total return)

International shares

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+5.89% (hedged to NZD) +5.29% (unhedged)

With global economic data remaining supportive and the US Federal Reserve content to maintain a measured path to increasing US interest rates, investors continued their enthusiasm for risky assets and developed market shares performed well over the quarter. Commodities generally also performed well, although a committee of OPEC-led producers is currently seeking to restrict oil supplies which has, in turn, seen the oil price drift lower. A slightly stronger New Zealand dollar against the basket of global currencies comprising the MSCI World Index saw reported returns from unhedged equities outperforming the comparable returns from hedged investments. Source: MSCI World ex-Australia Index (net div.)

Emerging markets shares

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+10.48%

Increased global confidence was also favourable to emerging share markets in the first quarter. Emerging market fortunes, which are often linked to commodities markets, regained investor interest and benefited from strong capital inflows. Aside from Russia, which battled against the headwind of a lower oil price, the other main emerging markets delivered impressive local currency returns, with China +13.1% and India +12.1% leading the way. Source: MSCI Emerging Markets Index (gross div.)

International fixed interest

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+0.58%

The US Federal Reserve delivered on a well-signalled rate rise in March by lifting the US Federal Funds rate by another 0.25%. More pertinently, they maintained expectations of two further rate hikes in 2017. With little change to accommodative policies internationally and the US meeting market expectations, global yields were largely unmoved, with headline 10 year yields of most major nations remained tightly range-bound. This contributed to a relatively benign bond market environment over the quarter. Source: Citigroup World Government Bond Index 1-5 Years (hedged to NZD)

International property

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+0.66%

International property similarly took second fiddle to equity markets over the quarter. The Trump administration’s failure to push through healthcare reforms was interpreted as a sign that other proposed stimulatory policies might also be difficult to deliver on. Any lessening in the US reflation story would be likely to have a dampening effect on property demand, and in the US (and globally), equity markets were the clear winners during the quarter while property markets drew breath. The S&P Developed REIT Index returned +1.58% in US dollar terms, while the Australian listed property sector was down, with the S&P/ASX 300 A-REIT Total Return Index dipping -0.08% in Australian dollar terms. Source: S&P Developed REIT Index (total return)

All returns are expressed in NZD. It is assumed that Australian shares, emerging markets shares and international property are invested on an unhedged basis, and therefore returns from these sectors are susceptible to movement in the value of the NZD.

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