InvestNow News – 3rd April – AMP Capital – How our International Equity Managers are positioned

27th Mar 20 – Trent Loi, Portfolio Manager

Market review

Financial markets around the world have suffered a significant derating – in fact, the quickest descent into a bear market in history. From the peak on 20 February 2020, the MSCI World Index has fallen 25.7% in 23 days. The sell-off is worldwide where the correlation between the countries spikes.

The chart below shows the month to date (to 24 March 2020) returns for various countries indices in New Zealand dollar (NZD) terms. The depreciation of the NZD relative to the major currencies cushioned the losses experienced in local markets.

From a sector perspective, the cyclical sectors such as energy, financials, industrials and materials experienced worse draw downs than the more defensive sectors such as consumer staples, health care and communication services. The traditional safe havens like real estate and utilities have not protected the investors in the current market rout.

The economic damage from a significant slow down in economic activities will have detrimental impacts on lodging, warehouse and shopping centre owners. Within the utilities sector, the European electric utilities companies were the underperformers following lock-downs in countries such as Italy, France and Spain dampening the demand for energy.

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