Investment update for September 2012
Central bank stimulatory policies drive markets
The strong performance of markets in September was fuelled by actions and announcements from major central banks around the world. The US Federal Reserve announced it would buy $40B in mortgage backed securities each month to stimulate improvement in the US economy and the unemployment rate. The People’s Bank of China injected US$60B (its largest recorded weekly injection) into money markets late in the month, in response to continued disappointing Chinese economic data. Due to the renewed efforts by central banks, global markets generally rallied. The S&P 500 is now near five year highs – a remarkable achievement in the context of bearish market sentiment that has prevailed since the GFC.
Unsurprisingly, given the announcements from central banks, most developed markets had a positive month led by Germany, Austria, Portugal, Spain, Canada and Hong Kong. The MSCI World ex-Australia Index (hedged in $A) was up 2.5% over the month. Unhedged returns (in $A) were slightly lower (2.2%) due to the $A appreciating against the $US. Greece, Netherlands, and France were the only developed markets to post negative returns over the month. Emerging markets (unhedged in $A) (5.4%) outperformed global markets, led by China, India and Korea.
The S&P/ASX300 Index continued its recent good run to finish the month in positive territory (2.2%). Small caps were the standout performing segment of the market (4.4%). Domestic equities were driven by the Resources Index (6.4%), which in turn was driven by small resources (15%), which excelled in an environment where commodity prices rallied. The Materials sector rebounded strongly from last month (8.3%); Healthcare (3.5%) and Telecommunications (1.9%) were the next best performers. On the flip side, negative returns were recorded by Utilities, Consumer Staples and Energy. Consumer Discretionary also struggled, driven by the weaker performance of retail and media stocks.
For the time being, markets have responded positively to additional stimulus measures. However, Chinese economic data continues to disappoint. In addition, the US ‘fiscal cliff’ and forthcoming elections – combined with the prospect of further bailouts in Europe and generally lower global growth expectations – make for a cautious outlook.
Broad stock market performance – September 2012
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||2.2|
|International Shares (MSCI AC World ex-Aust) hedged||2.2|
|Global Bonds (Barclays Global Aggregate (Hedged))||0.7|
|Cash (UBS Bank Bills)||0.3|
|Appreciation of $A against $US||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.|
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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