Three themes a top fund manager is watching closely

Global share markets bounced back during September with the MSCI World recovering from August’s falls to return 2.3% in local currencies. A feature of global markets during the month was the resurgence of value stocks, with the MSCI World Value index outperforming the Growth index by 3.3% over the month. This reflected a combination of factors, including increased potential of a US-China trade deal and extreme relative valuations.

Global manufacturing data has continued to worsen. While Europe has showed signs of weakness for some time, the US has recently joined the fray with the ISM Manufacturing PMI contracting in both August and September, following 35 months of expansion.

Chinese manufacturing PMI came in slightly better than expected, though still in contraction territory, at 49.8 (vs. 49.6 expected). The Caixin Manufacturing PMI, which tends to capture less SOEs, came in at 51.4 for September, well above the 50.2 expected.

New Zealand and Australian share markets performed well, both up 1.8% in their respective currencies. The strong performance of the New Zealand market followed what we consider one of the worst earnings seasons in recent times with multiple disappointments and downgrades to future expectations. These announcements were backed by a top down deterioration in business confidence, expectations of future trading conditions and future profits.