Investment update for April 2011
Global shares up, Australian equities down, commodities up, the $AU up
With continued unrest in Libya and concerns about oil supplies, oil prices continued an upward trend reaching a 32-month high at US$125 per barrel. More than half of reporting companies have exceeded their earnings estimates at this midway point of the US reporting season. Gold reached new highs during the month, reaching an excess of $1500 an ounce.
Australian equities were slightly down with the appreciating AUD and some trimming of Australian exposure by some offshore investors. With the high commodity prices, the Resources sector has over performed for the year despite a poor month during April. Energy, Materials, Industrials and Consumer Discretionary were the weakest sectors while Utilities, Financials and Telecommunications did much better. Continuing the trend of the last 3 months, small companies continued to underperform relative to the top 100 stocks. Listed property trusts showed some volatility so had a modest month; unlisted property slightly outperformed listed property with returns mostly reflecting income.
Global equities were up marginally on a hedged basis, and the Australian dollar strengthened against all major developed currencies resulting in unhedged returns falling for the month. Emerging Markets, Asia (including Japan) and Latin America had a weak month, while the USA, UK and Europe all performed well. Within Europe, Denmark and the Netherlands were weak and Greece fared poorly with concerns about their sovereign debt.
Amongst the broad cap market sectors, Automobiles, Food Beverage & Tobacco, and Pharmaceuticals all performed strongly, while all other industry groups struggled, with Energy, Transport, Banks, Software, and Technology Hardware & Equipment faring the worst.
Short-term interest rates in developed economies remain low, although China and India have recently raised their rates in response to emerging inflationary pressures. Australian bonds and global bonds performed solidly. Further rate tightening in China is expected. Credit has again been surprisingly resilient despite equity volatility, negative news and a strong US Corporate Bond supply. Global bonds on a hedged basis are generally outperforming Australian bond indices.
Despite continuing turmoil in the Middle East, the price of oil fell from US$125 to US$110 per barrel in late April. Similarly, the price of other commodities also fell, most notably, silver which fell from near US$50 an ounce at the end of March to approximately US$35 an ounce during April. Along with commodity declines, the $A also declined to US$1.07 after almost reaching US$1.10. All of these uncertainties will keep investor and consumer sentiment fragile, and investors can expect continued volatility in most liquid markets.
Broad stock market performance – April 2011
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||-0.3|
|International Shares (MSCI AC World ex-Aust) hedged||-1.6|
|Global Bonds (Barclays Global Aggregate (Hedged))||1.2|
|Cash (UBS Bank Bills)||0.4|
|Appreciation of $A against $US||5.8|
|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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