Selected Market Indicators for Periods Ended 31 July 2010

After posting their worst quarter since December 2008 in June world share markets rallied in July on the back of stronger than expected corporate earnings. Concern over the faltering economic recovery diminished to be replaced with renewed confidence in markets after European bank stress tests showed only 7 of 91 banks in the 20 country zone failing, relieving fears of a eurozone debt crisis.

The MSCI World Index (in local currency) gained 5.7% in July, with all markets posting positive movements. However, a strong NZ dollar eroded returns from offshore with unhedged global shares up only 2.6%. The NZ sharemarket followed the global trend, rallying a more modest 2.1%. Despite the positive sentiment, bond markets also rose, reflecting continuing underlying concern about economic growth prospects. Global aggregate bonds (hedged) rose 1%, with NZ government bonds rising 0.5%. Global listed property (hedged) rose strongly, up 7.7%, with NZ listed property following the trend, rising 1.6%.

Significant recent items include:

• Jobs data released in the US showed nonfarm payrolls fell 131,000 with the overall US unemployment rate held steady at 9.5%. The weak result was primarily caused by private employers, who only employed an additional 71,000 compared to the market expectation of 100,000. Private employment gains for July were led by manufacturing, education and health services.
  
  
• New Zealand jobs data for the June quarter was much weaker than expected with the unemployment rate rising to 6.8%, reversing most of the gain from the March quarter, when unemployment fall from 7.1% to 6%.
  
  
• The Reserve Bank of NZ lifted the Official Cash Rate by 0.25% to 3% late in July. In doing so, RBNZ Governor, Alan Bollard, stated the pace of future rate hikes is likely to be more moderate than previously projected in June. The market is now pricing in 0.90% of rate rises over the next 12 months.
  

An estimate of a balanced fund index return based on selected market indicators for July 2010 was 2.1%.

Trans Tasman Shares		Month	Year
The NZ sharemarket followed the global trend, rallying over the month to close 2.1% higher than the 12 month low seen last month. However, the NZX 50 has only gained 2% over the last year, reflecting uncertainty over the strength of the local recovery. Across the Tasman, the Australian market also gained, ending up 4.2% for the month.	NZX 50 (with ICs)	2.1	1.8
	Australian All Ords (n AUD)	4.2	10.2
Oversaes Shares
Global shares gained 5.7% (in local currency) over the month with strong corporate earnings data from the US driving the market higher. This was supported by the largely as expected results from the European bank stress tests. Gains were recorded in all major markets, including Japan, with Emerging Markets also up 5.8% (in local currency).	MSCI World (local currency)	5.7	9.8
	MSCI World (unhedged)	2.6	0.2
Property
Global listed property followed the lead of equity markets, up 7.7%, as risk aversion fell. Globally listed property remains the best performing sector over the last 12 months, up 37%. NZ listed property rose 1.6%, with NZ unlisted property also up 0.6% over the month.	NZX 50 Sectoral Listed Prop (ICs)	1.6	4.8
	UBS Global Property (hedged)	7.7	37.1
NZ Fixed Interest and Cash
NZ government bond prices rose 0.5% over the month, with 10 year yields staying steady at around 5.3% at the end of July. The RBNZ followed the June rate rise with a further 0.25% increase in the Official Cash Rate late in July.	ANZ NZ All Govt Stock	0.5	7.9
	ANZ 90 Day Bank Bill	0.3	2.8
Overseas Fixed Interest
Global sovereign bonds (hedged) rose 0.8% over the month, with global aggregate bonds (hedged) slightly higher again, rising 1%. Despite positive sentiment, increased volatility in equity markets saw investors continue to seek the relative safety of sovereign bonds, with fears of a double-dip recession not far below the surface.	Citigroup World Govt (hedged)	0.8	8.0
	Barclays Global Agg. (hedged)	1.0	9.8
Currency
The NZ dollar had a mixed month, posting strong gains against the greenback and yen, but falling against the euro and Australian dollar.	TWI	0.7	10.3

DISCLAIMER: The information contained in this material is intended, and purports to be, a general statement only covering the investment performance of selected market indicators. It has not been prepared having regard to your specific circumstances and accordingly you should not act upon the information contained herein without taking appropriate professional advice.  Source: MSCI.  Data provided 'as is'.