Investment update for February 2014
Rising AUD but mixed stimuli for the US markets
US equity markets reached a new all time high over the month on the back of strong reported earnings combined with evidence of renewed corporate merger and acquisition activity. US house prices continued to rise and are approaching 2008 levels. US Consumer confidence remains subdued after a poor Christmas period and recent extreme weather conditions. In Europe, European Central Bank policy remains ‘on hold’. Eurozone GDP exceeded expectations and economic growth forecasts are improving but are still relatively benign. Recent UK jobless claims fell faster than expected and December quarter GDP expectations were close to consensus estimates. The economic outlook for the UK generally looks softer. China exports achieved an annual growth of 10.6% to the end of January while manufacturing sentiment indicators for February were below expectations. Excessive leverage in the Chinese economy remains a key concern.
After a volatile start to the year for emerging-market equities, February saw some improvement, with the MSCI merging Markets index up by 0.8% in Australian dollar terms. Most emerging-market currencies also recovered some of the weakness seen in January, but notable exceptions were the Russian rouble and the Chinese renminbi. At the regional level, Greece and Poland were the strongest performers, while Hungary, Mexico and Russia were the weakest.
The MSCI World ex-Australia Index (hedged to $A) rose 4.4% over the month. The rise of the Australian Dollar against most major currencies resulted in a lower return of 2.4% (in $A) on an unhedged basis. From a global sector perspective Energy, Materials and Health Care were the strongest performing sectors. Telecoms was the only sector to record a negative return over the month while Industrials and Financials achieved positive absolute returns but lagged the broader market. The S&P/ASX300 Accumulation Index (4.9%) slightly outperformed hedged global equities as investor sentiment was again driven by similar macro themes. Small and Mid Caps stocks outperformed Large Caps with relative outperformance driven by Resources. All sectors produced strong absolute returns over the month. Energy, Consumer Discretionary, Financials, Information Technology and Utilities led the way while Telecoms was the weakest performing sector.
The Australian Dollar (AUD) appreciated +2.6% against the $US over the month in what was a volatile period for the AUD that traded between $US 0.873 and $US 0.909 before closing the month at $US 0.895. The AUD also appreciated against the Yen and Pond Sterling but was relatively flat against the Euro.
Broad stock market performance – February 2014
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||4.9||2.6|
|International Shares (MSCI AC World ex-Aust) hedged||4.4||3.6|
|Unlisted property (Mercer Unlisted Property Funds Index (Pre-tax))*||0.5||2.1|
|Global Bonds (Barclays Global Aggregate (Hedged))||0.7||2.0|
|Cash (UBS Bank Bills)||0.2||0.6|
|Check out AvSuper’s weekly returns and quarterly performance results Please note that past performance is not always a reliable indicator of future performance.|
*Estimate as at 10 March 2014 Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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