Investing highlights & lowlights — September 2015

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Investing highlights & lowlights — September 2015.
  • Volatility in global share markets continued in August as investors focused on concerns about a slowing Chinese economy and whether the US Federal Reserve would raise interest rates.
  • September was a quiet month for news in New Zealand, although the portfolio performed strongly. The EBOS share price continued the momentum gained after releasing better than expected profits at the end of August. Restaurant Brands produced strong second quarter sales, especially from KFC, while Auckland Airport international passenger numbers continue to be buoyant. The Summerset share price weakened during the month, following a very strong share price performance year-to-date. It was successful in obtaining a resource consent for a second village in Christchurch during the month.
  • Another tough month in Australia to conclude the toughest quarter for the share market since 2011. The portfolio performance (-0.6%) compared favourably with the broader market (-4.9%) as key portfolio holding Veda rallied 28% when a bid for it was made by London-based Equifax. A number of portfolio stocks had positive returns through the month, and the portfolio benefited from limited exposure to the Financials and Resources sectors.
  • In our International portfolios, Nike got off to a flying start for its 2016 financial year with strong growth across most categories and regions. On the flipside, Volkswagen's admission that it manipulated emissions tests on five models of VW and Audi cars over a six year period saw its share price savaged. You can read more about the Volkswagen situation and our response in A bird's eye view.
  • A quiet month for our Property & Infrastructure investments from a news flow standpoint. Of note, Zurich Airport's share price overreacted, in our view, to the surprise news that it is likely to implement lower airport charges in 2016. While the timing of the announcement was unexpected given the company is currently mid-way through its current regulated pricing schedule, Zurich has exceeded previous expectations and is still expected to achieve a fair return on its aeronautical operations. Meanwhile, Stride Property bolstered its portfolio by close to a third through the acquisition of a portfolio of 19 supermarkets, funded in part by a $130m equity raising which weighed on the share price.
  • The recent falls in the price of corporate-issued bonds around the world has allowed our fixed income team to uncover a number of investments that they believe offer considerable value for patient investors. The higher yield these bonds now offer should help improve the income our fixed income portfolios generate over the coming years. The increased appetite for safe-haven assets, such as government bonds, and their subsequent rise in value has not offset the declines seen across the corporate bond market. This caused diversified fixed income portfolios to register minor falls in value this past month.


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