OneAnswer KiwiSaver Scheme Australasian Share Fund

New Zealand shares posted modest gains in Q4, with the NZX 50 up 1.9%, bringing its annual return to 3.3%, well behind most of its global peers. Persistent economic headwinds tempered sentiment despite broad-based gains, as 36 of 50 index constituents finished higher.

The Reserve Bank of New Zealand (RBNZ) lowered the Official Cash Rate twice during the quarter, bringing it to 2.25%. At its November meeting, which included a 25 basis point cut, policymakers noted that inflation pressures were easing (despite headline inflation remaining near the top of the target band) and signalled that the interest rate cut may mark the end of the current easing cycle.

Economic data improved over the quarter, providing early signs that activity may be turning a corner. Third-quarter GDP grew 1.1%, with expansion across 14 of 16 industries. Manufacturing rebounded by 2.2% following a sharp Q2 slump, while construction rose 1.7%, although annual output remains down 8.5%. Meanwhile, business confidence continued to improve, with a sharp jump in December. The ANZ Business Confidence Index rose to its highest level in around 30 years, suggesting firms are increasingly upbeat about the year ahead.

Across the Tasman, Australian shares were some of the weakest-performing over the quarter, with the ASX 200 falling 1.0%. Its weakness was largely due to a stronger-than-expected inflation reading, which erased hopes of near-term rate cuts.

Positive fund performance was driven by strong stock selection, led by seafood company Sanford. Shares rose 35.1% during the quarter after the company reported robust profit growth for the year ended September, underpinned by improved cashflow and a substantial reduction in debt. Earnings before interest and tax rose 88% to $102.1 million, while net debt fell from $185.5 million to $93.4 million.

Meanwhile, overweight positions to several of the retirement sector companies also contributed to fund performance, notably Oceania Healthcare and Ryman Healthcare, which saw their share prices rise 33.3% and 12.3% respectively. The retirement sector was supported by the interest rate cuts by the RBNZ, which improves the outlook for the housing market, lifting demand for retirement sector units.

Elsewhere, an overweight position in logistics company Mainfreight also boosted returns, as its shares rose 11.1%, supported by resilient trading conditions, while zero-holdings of Gentrack Group and Precinct Properties added to relative performance, with their shares ended the quarter lower.

Partially offsetting positive performance was the fund’s holding in biotech manufacturer CSL, whose share price fell 11.5% over the quarter, extending a difficult period for the stock. Weakness was driven by a sharp decline in influenza vaccination rates in the US, alongside ongoing margin pressure in its plasma business.

The fund invests mainly in New Zealand and Australian equities. Investments may include:

• Equities in companies that are listed or intend to list on the New Zealand or Australian stock exchanges
• Cash and cash equivalents.

This chart shows the mix of assets that the fund generally intends to invest in – 100% equities.

See the fund's actual investment mix on page 3 of the fund update.