• NELSON: +64 (3) 545-8029
  • 0800 200 012 (in NZ only)
  • BLENHEIM: +64 (3) 578-1921
  • Monthly Review – November 2020

    17th December, 2020
  • New Zealand

    The NZ economy appears to be recovering more quickly than previously expected. The housing market is buoyant and third quarter retail sales recorded the strongest quarter on record, up 28%. Unemployment showed a positive surprise at 5.3% - the highest in four years but lower than the Reserve Bank’s expectation of 7% and earlier predictions of 10%. While the Reserve Bank will start the funding for lending programme in December (to further lower funding costs), it is less likely they see the need to move to negative interest rates in 2021.

    Despite the positive economic indicators there is increasing evidence of significant supply chain stress. The disruptive impact of COVID-19 on global production facilities, combined with the rapid demand increases experienced as economies come back online, is causing supply shortages across many industries. This is likely to drive up prices in the short term and if sustained it may begin to drag on growth into the first quarter of 2021.
    The NZ Share market rose by 5.68% over the month, with the top performers being Fletcher Building, Air New Zealand and Meridian.


    The global economy in November was dominated by three major events: the US elections, the third wave of COVID-19 across Western Europe and the US, and the announcement of the vaccines. The markets tended to focus on the good news and the promise of a post-vaccine return to normality in 2021. November saw some of the best monthly returns on record and major indices in the US recorded new highs. While share markets were up, the most impressive moves were seen in previously unloved sectors as the vaccine news triggered a sharp rotation. Investors sold business that had been the COVID-19 winners (eg technology shares) and bought companies which will benefit most from a cyclical recovery.

    How does this impact your investments?

    The Income Category returned -0.72% for September, taking the 12 month return to 1.78%. With the Reserve Bank suggesting that the economy was looking better and that they may no longer need to move to negative interest rates, the interest rate market moved prices significantly higher. The benchmark 5 year swap rate moved from a record low of 9bps in Mid-October to 48bps by mid-November. NZ Funds expects a general move higher in interest rates both in NZ and globally through the first half of 2021.

    The Inflation Category returned 7.18% for the month, taking the 12 month return to 5.40%, with the largest merger arbitrage position, Netherlands-based Grandvision, performing well in November.

    The Growth Category returned 14.96% for the month, taking the 12 month return to 17.41%. Small caps, Chinese and Australian shares are three themes that are reflected across the Category. NZ Funds believes al three are poised to disproportionately benefit from a full-fledged economic recovery. NZ Funds has initiated a basket of reflation positions across the Growth category, including short interest rates and long oil futures. The category remains overweight shares compared to benchmarks and NZ Funds remains positive on shares going into 2021.

    Please contact us for the full November 2020 Monthly Review