Australian stocks hit a record high last month while New Zealand's eased. Photo / 123rf
Australia’s sharemarket hit a record high last month and other major markets have also done well, leaving the New Zealand market in the dust.
The benchmark S&P/NZX50 index is still short of its record high 13,558, set in January 2021.
By contrast, Australia’s market hit a new record of 8532 last month — its best month since July 2024.
Robbie Urquhart, senior portfolio manager Australian equities at Fisher Funds, said there were some stark contrasts between the New Zealand sharemarket and other comparable markets.
Over January, Australia’s S&P/ASX200 gained 4.5% while the New Zealand index dropped S&P/NZX50 1%.
There was a similar underperformance compared with the other markets — with the United States’ S&P500 gaining 2% while European indices were up by 5% to 7%.
Urquhart said the big driver of those offshore markets’ performance was the financial sector — banks in particular.
“Bank earnings have been better than expected, and the Aussie banks have followed suit.
“In Australia, 10 out of 11 sectors were up for the month, with energy being the biggest laggard.”
Consumer-discretionary was one of the best-performing sectors.
“When you dig into that, and look at some of the discretionary-based retailers, there is a bifurcation between what we saw in Australia and what we saw in New Zealand.
“In short, Australia’s consumer-discretionary names have traded a lot better than ours.”
Australia’s JB Hi-Fi saw its share price gain 10% over January, Harvey Norman was up 11%, and Super Retail Group gained 3%.
Travel companies also performed well.
By contrast, KMD Brands dropped 9%, Briscoe Group fell by 7.5% and Michael Hill International (MHI) dropped 12.5%.
Official data shows Australian retail trade was up 4.6% over December, with the Christmas trading period being quite strong.
But perhaps the most telling story was in individual company reports.
For MHI, same-store sales for the 26 weeks to December 29 were up 2.7% for Canada, up 0.6% for Australia but were down 7.8% in New Zealand.
Briscoe Group’s latest showed sales for the year to January 26 were just below the previous year’s.
The company has said its net profit will not meet the previous range given by the group but will be greater than $66m.
Urquhart said the reports fromcompanies point to tough times for the New Zealand consumer continuing.
“It seems to be that Australian consumer households are outspending New Zealand by quite some margin.
“New Zealand consumer spending, at some of these data points, suggests that we have not got a durable turnaround or improvement in the household-consumer economy in New Zealand yet.
“New Zealand is underperforming our closest comparable nations, for sure,” he said.
Central banks on both sides of the Tasman are due to issue their first interest rate measures for 2025 later this month.
The Reserve Bank of Australia (RBA) is due to release its rate call on February 18 and market expectations are running to a 25 basis point cut — which would be the first in its current cycle.
However, Urquhart said the strength of the Australian retail sector could give RBA governor Michele Bullock pause for thought.
In contrast, he said the market is supportive of a 50-basis-point cut from the Reserve Bank of New Zealand on February 19, and for 75 basis points more in cuts over the rest of the year to December.
For the moment, it looks like F&P Healthcare (FPH) — with its large presence in Mexico — looks to have won a reprieve with US President Donald Trump holding off on imposing tariffs on its southern neighbour.
Craigs Investment Partners has revisited its analysis of what it means for FPH now that Mexico is off the hook for a month.
The firm’s head of institutional equities research, Stephen Ridgewell, has assessed the impact of the week’s events on FPH.
Ridgewell said the pause in the possible instigation of tariffs on Mexico significantly increased the chance they would not be applied at all.
“With Trump’s willingness to actually impose tariffs still unclear, we continue to assume no tariffs in our forecasts and valuation of FPH,” he said.
However, Craigs has updated the scenario analysis it published two weeks ago based on the additional information from FPH.
“In short, FPH’s ability to mitigate tariffs is less than we previously understood, given restrictions in its ability to supply key markets from Mexico.
“If the US does eventually impose a 25% tariff on Mexico, but not New Zealand, then we estimate a direct impact to net profit of $60m, relative to our current estimates.
“This impact assumes that the proportion of FPH product sold in the US that is made in New Zealand increases from 40% to 70%, and correspondingly reduces in Mexico.
“We think this direct impact can then be partly mitigated by price increases.”
“While Trump’s backdown is encouraging, we remain mindful of his campaign promise to impose universal tariffs of 10% plus.
“Recent media reports suggest that while these may be watered down, medical supplies are one of the key industries the US wants to re-shore and target with tariffs/incentives.”
A universal 10% plus tariff would increase the impact on net profit by about $30m.
“That said, there seems to be a good chance that countries that are in trade deficit with the US are mostly spared (NZ/US trade is balanced on goods and services, but New Zealand makes a surplus on goods alone).
The final quarter of 2024 presented a mixed bag for the New Zealand economy, research firm Morningstar says.
“While some indicators pointed towards a potential upswing, others suggested continued headwinds.
“Globally, economic uncertainty persisted, with geopolitical tensions and varying growth trajectories across major economies.”
Most multi-sector KiwiSaver funds produced positive returns over the December quarter.
As for default funds, Westpac noticeably struggled versus the others in this last quarter, with Simplicity performing strongly across all time frames, Morningstar said.
“Quay Street continues to perform well across many time periods in the conservative and balanced categories.
“Milford has consistently high performance within the moderate, balanced and growth categories over the long term, albeit struggling a little recently.
KiwiSaver assets on the Morningstar database increased during the December quarter to $121.9 billion.
ANZ leads the market share with almost $22b.
ASB is in second position, with a market share of 15.0%.
Then goes Fisher, Westpac, and Milford.
The five largest KiwiSaver providers account for about 66% of assets in the Morningstar database, or about $81b under management.
“We estimate these five providers will deduct more than $650m in fees in 2025 from KiwiSaver members, at an average fee of around 0.80 of a cent per dollar invested.
Over 10 years, the aggressive category average has given investors an annualised return of 9.3%, followed by growth (8.3%), balanced (6.7%), moderate (4.7%), and conservative (4.3%), Morningstar said.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector and energy. He joined the Herald in 2011.
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