Investment update for March 2014
Defensive shift after Russia annexes Crimea
Tensions flared in Ukraine as Russian troops annexed the Crimean peninsula following the ousting of Ukrainian President Viktor Yanukovych. While the political dimensions to this unfolding crisis are complex, the response from global investors was in favour of defensive assets. Investor sentiment was further weakened by concerns related to the Chinese shadow banking system and the impact of a “clean-up” on growth rates. New US Federal Reserve Chair Janet Yellen spooked markets mid-month by hinting at a faster pace of interest rate normalisation than the market was pricing, while conditions in the Eurozone remain depressed, signalling the need for additional monetary easing.
The MSCI EM Index continued its rebound in March, gaining 3.1% which meant that January’s sharp loss had almost been reversed by the end of the first quarter. The investment climate reflected a slight lowering of the international tension with regard to the situation in the Black Sea and patchily-weak economic data from China, which were taken positively by investors expecting the government to announce a stimulus package. India, Indonesia and South Africa, problematic markets in 2013, all announced positive trade and current account figures, and were rewarded with positive currency movements, while the Chinese yuan weakened a little against the US dollar on announcement of a widening of its permitted trading band mid-month.
The S&P/ASX300 Accumulation Index (0.2%) slightly underperformed hedged global equities as investor sentiment was again driven by similar macro themes. Top 20 stocks were the strongest performers in the Australian market, whilst small cap stocks underperformed. From a sector perspective, Financials and Industrials were the strongest performers, while Materials stocks lagged the most. Within the small cap universe the difference between Industrials and Resources was stark, with the latter underperforming by 6.0%.
The Australian Dollar (AUD) appreciated 3.6% against the US Dollar over the month as the re-pricing of Australian interest rates made it relatively more attractive. The US Dollar appreciated against most other major currencies as the rise in US bond yields and more positive relative growth outlook led to stronger investment flows into the US economy.
Broad stock market performance – March 2014
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||0.2||2.0|
|International Shares (MSCI AC World ex-Aust) hedged||0.4||1.6|
|Unlisted property (Mercer Unlisted Property Funds Index (Pre-tax))*||0.3||1.4|
|Global Bonds (Barclays Global Aggregate (Hedged))||0.3||2.7|
|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 8 April 2014 Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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