Monthly review March 2014

Global equity markets were mixed during March. The US S&P 500 was essentially flat (+0.04%) as the US Federal Reserve further reduced their monthly asset purchases but US economic data is now improving as the country emerges from one of the coldest winters on record with manufacturing leading the way.

Australasian markets were positive with the NZX50 finishing the month up 3% and the ASX200 closing up 0.6% (in NZD). The New Zealand market was one of the strongest in the world, up 8.5%, over the first quarter of 2014. In New Zealand data continued to be generally robust. GDP growth in Q4 increased 0.9% quarter on quarter and 3.1% year on year. Net migration of 3,460 in February was at a 10 year high and along with the strong economy is supporting consumer confidence which rose to the highest level since 2005 (on the Westpac-McDermott Miller Consumer Confidence Survey). While the trade surplus reported in January was at record highs, the Global Dairy Trade Index fell 9% in early April and is now down 18% from the February peak. In Australia economic data remains mixed. The NAB business survey showed a slight fall in business confidence while consumer confidence fell for the fourth consecutive month and is now 10% below its recent peak. Meanwhile, the housing market continued to respond to record low interest rates in March with aggregate house prices rising 2.3% month on month and 10.6% on the prior year. Sydney is particularly strong, up 15.6% over the year. Unsurprisingly the RBA kept rates on hold at 2.5% for the eighth consecutive meeting and retained a neutral policy setting. It noted that China “may have slowed a little in early 2014” but otherwise the global outlook was improving. On the domestic front the RBA continued to refer to labour demand as “weak” but does see slightly stronger consumer demand and, despite a recent bounce in the Australian dollar, re-confirmed the view that the lower dollar is helping to rebalance growth.

IPO and corporate activity continued in March. Hochtieff, major shareholder of Leighton Holdings, announced it would make a conditional proportional off-market offer to acquire 3 out of every 8 shares held by Leighton shareholders and Stockland separately moved to acquire a 19.9% strategic stake in the Australand Property Group. There remains a heightened level of new issuance with a number of new IPOs being announced during the month.

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To 31 Mar 2014 3 mths % 6 mths % 1 yr % 2 yr p.a. % 3 yr p.a. %
Alpha Fund* 6.14 17.00 33.71 27.92 15.41
Australian Fund* -0.67 3.66 8.39 14.56 4.04
Equity Income Fund* 5.23 5.92 13.66 - -
Trans-Tasman Fund* 4.33 9.44 18.02 19.82 10.12
O.C.R. 0.63 1.26 2.52 2.51 2.52
ASX200G NZD 0.33 0.46 -2.59 7.25 0.25
Trans Tasman Index Hedged 5.30 7.05 14.84 - -
Trans Tasman Index Unhedged 4.42 4.49 6.82 14.13 7.29

* Fund returns are before all fees and expenses, and before tax which varies by investor.

Past performance is not a guarantee of future returns.