Your wealth - The quick get a share of returns

Peter v O'Brien

Friday 23rd April 2004

Investors in international markets need quick reactions this year to keep ahead of share price fluctuations.

The table compares figures for eight market indices this year, including their highs and lows.

It is notable for the small changes since the end of 2003 and wide variations between highs and lows.

The percentage movements will change as the year wears on, but a mighty effort would be needed to beat some of 2003's gains.

Technology-based Nasdaq (US) was the best-performed index last year, rising 49.9%. Hong Kong's Hang Seng was second, with a 34.9% gain, ahead of the US Standard & Poor's 500 (26.4%), Japan's Nikkei (24.4%) the UK's FTSE (13.6%), Australia' ASX all-ordinaries (11.1%) and that country's benchmark ASX 200 (9.7%).

Things were still mixed last year, the position summed up in financial services group Axa Asia Pacific Holdings chairman Rick Allert's address to his company annual meeting last week.

"On the back of one of the worst periods in recent history for global equity markets, we had the outbreaks of Sars in Asia and the war in Iraq in the first half of 2003. As a consequence, consumer confidence was quite low.

"In contrast, there was a strong recovery in the US, and to some extent in European stock markets, in the second half of the year and a strong return to growth in the Hong Kong economy.

"Consumer confidence improved, which led to an increase in new business and funds flows in our Australasian and Asian businesses."

That would have been the experience of most organisations involved in financial services.

Some things have not changed this year.

The war in Iraq is officially over, but there have been more deaths and injuries among coalition armed forces than during formal hostilities.

Add in the casualties among Iraqi militants and civilians and the situation seems a mess.

Markets are extraordinarily, sometimes almost irrationally, sensitive to international political developments, including terrorist attacks.

That was seen after the Madrid rail bombings, when all eight indices fell. They rebounded two days later when fundamental economic and business performance reasserted themselves.

Regular terrorist attacks, rumours of potential attacks and events such as tit-for-tat strikes between Israelis and Palestinians were some of the reasons for the spreads of index highs and lows.

Overseas observers reckon the US economy is on an expansion path, despite periodic hiccups in economic statistics.

Other major economies and business sectors are reporting improvements in investor confidence.

Traders, who regularly indulge in profit-taking, are responsible for seesaw movements in indices at any time and there was no immunity from that influence this year.

New Zealand investors in overseas markets, directly or through managed funds, had their usual battle with volatile currencies. For example, the New Zealand dollar was 65.62US¢ on December 31. It hit a 2004 high of 70.65US¢ (using close of business in New Zealand and ignoring intra-day changes) on February 18 and 19 before retreating.

The rate was 63.98US¢ on April 16, a 4% fall since December 31 and a decline of 9.4% from the year's high.

The London gold price was $US416.25 an ounce on December 31, rising to a 2004 high of $US427.25 on April 1 (perhaps an appropriate date) after a low of $US390.50.

It was $US400.85 last Friday.

Silver closed 2003 at $US5.94 an ounce, reached a high of $US8.26 in April and was $US7.13 on April 16.

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