The Asia Pacific stock market leaderboard has a new name atop it: New Zealand.
It's not a market I write about much or that anyone outside Wellington or Auckland does, for that matter. Yet stocks in the Land of the Long White Cloud were up 24.1% for the first nine months of the year.
That has seen the New Zealand Exchange crest above US$100 billion in total market capitalization for the first time in history.
New Zealand primary listings give you a good bolt hole from the woes of the world. That's what PayPal co-founder Peter Thiel found when he took out Kiwi citizenship and bought his 477-acre former sheep station on the South Island. Silicon Valley "preppers" have followed his tracks.
New Zealand stocks are good, honest, local companies. Of course, that's tempting fate there will be a stock-specific scandal. But they have strong track records and easily understandable business models that actually involve profits -- not trendy, I know, but true.
The electricity utility Meridien Energy NZ:MEL is actually the largest local company by market value, at US$8.6 billion. But it's 51% owned by the government, so the free float knocks it in terms of market relevance and index weighting.
Auckland International Airport NZ:AIA, with an ADR (AUKNY) , is valued at US$6.9 billion by the market. But it is 22% owned by the Auckland city council, which also reduces the amount of the company that's in the hands of conventional shareholders.
Both companies are going to produce regular, predictable earnings. The New Zealand economy is a persistently steady performer (more on that later) that weathers economic downturns well.
Fisher & Paykel Healthcare NZ:FPH, with an ADR (FSPKY) , is the largest purely private company listed in New Zealand, with a market capitalization of US$6.2 billion. Spun out of the fridge and washing machine maker now called Fisher & Paykel Appliances NZ:FPA, the healthcare unit makes respiratory humidifiers that are used for ventilators in hospitals.
That's a specialty niche that's not going to be susceptible to economic whims and fortunes. Intensive care is intensive care, when you need it. Half the products it sells into the United States come from its factory in Tijuana, so those machines are spared tariff hikes for now.
You've got milk in the second spot for New Zealand market cap, in the form of the A2 Milk Co. NZ:ATM, with a slightly smaller market cap that still rounds to US$6.2 billion. It produces a very specific kind of milk. The company was founded in 2000 to specialize in milk that contains only A2 protein, one of the beta casein proteins found in conventional milk along with A1.
A2 Milk believes the A1 protein is harder to digest. It breeds its cows to produce only A2 protein. It claimed in a lawsuit that A1 may be a risk factor for diabetes and heart disease, and even linked to autism and schizophrenia, although the company walked that claim back and no longer makes the claim in any marketing. The two founders both died suddenly in their 50s in 2003, one of an apparent heart attack, the other of cancer, for what that's worth.
Still, China presents a huge market for A2's milk, as well as for baby formula. The company says it has cornered 6.4% of the infant formula market in China. U.S. milk drinkers can check out the A2 difference at Kroger and some Costco and Walmart stores. It's "premium milk."
A2 Milk's arch rival is Fonterra, a dairy co-op that produces Anchor butter. It's the world's largest milk exporter, but is owned by 10,000 or so farmers. The two have reached a truce of sorts, with Fonterra licensing the A2 name and intellectual property for New Zealand sales.
Mobile phone provider Spark New Zealand NZ:SPK, with the ADR (SPKKY) , at US$5.2 billion is the only other New Zealand company with a market capitalization of over US$5 billion. It's a telecom that again is a dependable earnings producer.
The gains for New Zealand stocks this year narrowly outdo the 22.6% performance of Australian stocks, which share many characteristics with their neighbors across the Tasman Sea.
Chinese markets, fretting over the trade war with the U.S. and a domestic growth slowdown, had been leading world markets, but after recently correcting are up "only" 20.2% through the third quarter.
The Wellington stock market keeps going strong, up 4.6% in the third quarter alone, at a time when a lot of Asia, China included, dipped into the red.
How to trade New Zealand
U.S. investors looking for broad New Zealand market exposure have about as much choice as early customers of Henry Ford had with their vehicles' paint color: You can have any ETF you want, as long as it is the iShares MSCI New Zealand ETF (ENZL) .
It's not a crowded trade. The fund only has US$165 million in assets under management, with US$100 million generally seen as the minimum necessary for an ETF to keep the lights turned on.
The fund does a good job of screening out companies such as Westpac Bank, ANZ and the telecom Telstra. Those are three of the largest companies by market value on the Wellington exchange, but they all have their primary listing in Australia.
Australia has not seen a full year of economic decline since 1991. New Zealand claims exactly the same streak, bar a 0.4% dip in GDP in 2008, post-crisis.
New Zealand's economic growth is forecast by Oxford Economics to run at 2.8% for 2019 and at 1.9% in 2020 before rebounding above 2.0% for the foreseeable future.
Although market watchers in New Zealand are fretting about the slowing growth and signs manufacturing in particular is having a tough time, it is still solid performance at a time many economies are fighting for any growth at all. Australia, by contrast, should slow to 1.8% growth in GDP this year, with the United States dropping to 2.2% in 2019 and then to 1.6% in 2020.
The New Zealand jobless rate is 4.0%, a full percentage point below Australia, and is set to stay that way for the foreseeable future. Interest rates are low at 1.3% and coming down.
It would be a surprise to see New Zealand stocks going forward reproduce their results in the first three quarters of the year. Nonetheless, they continue to outperform. Their domestic and dependable nature should make the New Zealand ETF a rock to rest on, if the rest of the world finds an economic hard place.