Commentary for June 2024

In June 2024, the New Zealand share market declined due to several factors: lower earnings expectations, weak local economic data, and major financial transactions including Infratil raising capital and BP’s sell-off of Channel Infrastructure. The S&P/NZX50 Portfolio Index fell -2.06% in the month and -6.15% over the quarter. Weakness in electricity gentailers, a2 Milk, and real estate companies weighed heavily on the market for the month, while declines in industrials, communication services, and real estate contributed to the quarterly drop.

New Zealand Real Estate Investment Trusts (REITs) fell during the month by -3.14% (S&P/NZX All Real Estate Industry Group Index) and quarter by -8.55%, influenced by disappointing post-earnings forecasts in March, increased leasing risks from weak economic conditions, and high investment costs due to prolonged high official cash rates. Additionally, New Zealand REITs were affected by selling to fund investments in Infratil’s capital raising and the sell-down of Channel Infrastructure. Conversely, Australian REITs saw gains for the month +0.39% (S&P/ASX 200 A-REIT Index) due to strong company updates and increased buying and selling activities, led by industrial and specialist REITs. However, over the quarter, Australian REITs declined by -5.63% due to weakness in the office, diversified, and retail real estate sectors.

New Zealand fixed interest generated a strong positive return in June with the Bloomberg NZBond Composite 0+ Yr Index returning 0.98% for the month and 0.80% for the quarter. Global fixed interest (Bloomberg Barclays Global Aggregate Index) returned 0.87% for the month and 0.08% for the quarter.

Globally, the economic outlook may support positive returns, with moderate global growth expected and slowing inflation. Some central banks, like New Zealand’s, may ease monetary policy, while others, like Australia’s, could maintain or increase rates due to persistent inflation. The European Central Bank lowered interest rates cautiously, while the US Federal Reserve scaled back its expected rate cuts. Minutes from its June meeting outlined that policymakers are seeing progress on inflation but need to see more data before cutting rates. A series of weaker-than-expected economic data strengthened the case for Fed rate cuts this year.  This macroeconomic environment could support share market returns, but markets need to continue to balance disinflation and growth concerns.

Geopolitical risks, including elections in the US, France, and the UK, add to investor uncertainty.

IMPORTANT NOTICE AND DISCLAIMER
This publication is provided for general information purposes only. The information provided is not intended to be financial advice. The information provided is given in good faith and has been prepared from sources believed to be accurate and complete as at the date of issue, but such information may be subject to change. Past performance is not indicative of future results and no representation is made regarding future performance of the Funds. No person guarantees the performance of any funds managed by Harbour Asset Management Limited.

Harbour Asset Management Limited (Harbour) is the issuer of the Harbour Investment Funds. A copy of the Product Disclosure Statement is available at https://www.harbourasset.co.nz/our-funds/investor-documents/. Harbour is also the issuer of Hunter Investment Funds (Hunter). A copy of the relevant Product Disclosure Statement is available at https://hunterinvestments.co.nz/resources/. Please find our quarterly Fund updates, which contain returns and total fees during the previous year on those Harbour and Hunter websites. Harbour also manages wholesale unit trusts. To invest as a wholesale investor, investors must fit the criteria as set out in the Financial Markets Conduct Act 2013.