The New Zealand sharemarket has been the world's best-performing market this year.
This assessment is based on the MSCI country indices, which covers 45 developed and emerging sharemarkets.
In the nine months to September, the MSCI New Zealand gross index rose 11.1 per cent, making New Zealand the only country to have a positive return in local currency terms.
The next best performing markets were Indonesia, which was down 1.5 per cent, and South Africa, down 2.7 per cent.
The MSCI 11.1 per cent gain was well above the NZX50 gross index's more modest rise of 1 per cent.
This is because the MSCI index has a much higher weighting towards the largest listed companies, which have significantly outperformed the sharemarket average this year.
One of the best ways to compare sharemarket performances is to look at them in constant currency terms, as this neutralises the effect of currency movements.
The NZX has also been the best performer this year on a constant currency basis, with a gross return of 8.7 per cent.
The Indonesian market is the second best market with a positive return of 0.6 per cent and Morocco is in third place with a negative return of 5.3 per cent.
It has been a terrible year for world sharemarkets, with the notable exception of the NZX.
The 24 developed markets were down 11.8 per cent over the first nine months and the emerging markets were down 21.7 per cent.
The MSCI BRIC (Brazil, Russia, India and China) index plunged 25.9 per cent and the PIGS (Portugal, Ireland, Greece and Spain) have also had an extremely poor year.
Not surprisingly, Greece has been the world's worst performing market with a negative return of 48.5 per cent between December and September.
The Australian sharemarket has had a poor year, and the MSCI Australian gross index is down 17 per cent (in US dollars).
This has had a negative effect on most New Zealand PIE funds and private portfolios because these usually contain ASX-listed company investments.
The ASX's performance is well behind that of the NZX because it is dominated by banks and resource companies, two of the world's worst-performing sectors this year.
World metal and mining stocks have fallen 30.1 per cent, and banks are down 22.8 per cent.
New Zealand has no listed domestic banks and our listed mining sector is small.
Two of New Zealand's biggest sectors, consumer staples and utilities, have outperformed the world market average.
The consumer staples sector - mainly food, beverages, tobacco and household and personal products - has had a small positive return, but global utilities have fallen by just under 5 per cent.
The ASX performs well when the finance sector is growing and other countries' economies are doing well. This applies particularly to China, which generates huge demand for Australia's mineral exports.
The New Zealand economy is more defensive because it is dominated by consumer staples and utilities, mainly electricity companies.
The NZX should underperform world sharemarkets when the world's economy is buoyant, but it is likely to outperform them when there are concerns about economic conditions in the Northern Hemisphere. Knowledgeable investors understand this and have not substantially reduced their exposure to the domestic sharemarket even though the media has been dominated by gloom and doom stories about Greece and other European nations.
The column on the right of the table shows the gross returns of some of the world's sharemarkets since October 1, 2007.
That was the day the new PIE (portfolio investment entities) system began and the KiwiSaver scheme started to invest.
The ASX, NZX and Wall St have fallen by around 20 per cent over the four year period, slightly less than the 25.2 per cent decline recorded by the MSCI index of developed markets.
The PIGS have had a particularly bad run since October 1, 2007.
The Greek sharemarket has plunged 87.2 per cent, Ireland 78.6 per cent, Portugal 43.9 per cent and Spain 32.9 per cent.
Poorly performing bank stocks have been major contributors to the dreadful performance of these markets.
Disappointing equity returns are a problem for KiwiSaver members because a high percentage of these long-term superannuation schemes should be invested in growth assets, particularly for those aged 50 and younger.
There has been a big focus on fees, yet fund performances will have a far bigger effect on the final payout at 65 because the performance of KiwiSaver funds has varied between plus 40 per cent and minus 40 per cent over the first four years of the scheme.
The huge variation in returns emphasises the importance of picking the best asset class mix and a top-performing fund manager.
Although Greek and European problems continue to make headlines, the performances of the NZX and ASX over the next year or so are likely to be dominated by other factors, particularly the Chinese economy and commodity prices.
New Zealand and Australia are major commodity producers.
We produce soft commodities - renewable products such as dairy, meat and fruit - whereas Australian has hard commodities, mainly minerals. Hard commodities are non-renewable and a new source has to be found once an existing one is exhausted.
Significant increases in hard commodity output can be achieved through capital expenditure, but a big boost in soft commodity production is much more difficult to achieve, largely because of land constraints.
This is reflected by New Zealand's milk production figures and iron ore output in Australia over the past eight years. Milk products and iron ore are New Zealand and Australia's largest exports respectively.
Australian iron ore production rose 95.7 per cent between mid-2003 and mid-2011, mainly because of huge capital expenditure on new production facilities.
This gave a significant boost to the Australian economy through capital expenditure programmes and increased exports.
Fonterra's milk production grew by 17.2 per cent over the same eight year period, even though many farms have been converted from beef and sheep to dairy.
Iron ore prices have increased 11-fold - from US$15 a tonne eight years ago to US$170 a tonne today - while milk powder prices have risen a much more modest 1.5 times over the same period.
If the Chinese economy slows abruptly, commodity prices have far more downside because production and prices have risen more rapidly than soft commodity output and prices.
So New Zealand and Australian investors have to answer some important questions;
* Will hard and soft commodities fall, and if so, to what extent?
* What impact would these price falls have on Australia and New Zealand and their respective currencies?
The Australian economy outperformed the New Zealand economy, in terms of GDP growth, for five years up to last year, but the IMF is predicting New Zealand will outgrow its transtasman neighbour this year and next.
The outcome will very much depend upon the relative performance of soft and hard commodities.
But the performance of the NZX, compared with the ASX, this year indicates that investors believe the IMF forecasts are realistic.
Brian Gaynor is an executive director of Milford Asset Management.