Harbour Monthly Commentary: Theme watch in investment markets

• The New Zealand market continued its recent strength returning 2.5% in the month and now up 24% for the year to date.  The successful IPO of the Fonterra Shareholders Fund was the highlight. First half earnings reports from several companies were also on balance solid.  Several healthcare companies had upgrades to earnings prospects. The period was also marked by evident reinvestment of the Fisher and Paykel Appliance proceeds.

• Global markets were positive in the month, buoyed by more positive economic data and commentary suggesting that the US fiscal cliff will likely be better managed than expected.  In China, leading indicators also point to signs of improvement in domestic activity.  The MSCI World Index rose 1.5% in the month.

• The Australian market (+0.5% in Australian dollars) underperformed global markets, held back by weakness in the resource and energy sectors. Slowing in mining investment was reflected in the mining services and contractor sectors with many companies downgrading profits sharply. 

• In contrast, the major miners signalled scaled back capital expenditure plans and Rio Tinto announced $5bn of cost savings by 2014, which was taken positively by the market. We continue to like the larger miners as confidence in a Chinese recovery improves.