Investment update for April 2013

A good month in spite of a struggling Europe

Over the month, the International Monetary Fund cut its forecast for global growth from 3.5% to 3.3%. Investor confidence in Europe remained shaken by recent events in Cyprus and continuing concerns for the broader European region. A stubbornly high unemployment rate, which has crept above 12%, and a continuing recession are inhibiting a rebound in European consumer and investor confidence.

Meanwhile in the US, recent GDP data was slightly below consensus expectations. However, this was offset by improvements to US jobless claims and consumer spending – a net win for continuing improved investor sentiment reflected in the surge of US equity markets. In Japan, local equity markets continued to rally on the back of aggressive monetary easing. In summary, it was a good month for markets in the context of uncertainty in relation to Europe’s ability to manage a meaningful economic recovery.

International shares

The MSCI World ex-Australia Index (hedged in $A) was up 3.0% over the month. With the $A weakening against all major currencies except for the yen, unhedged returns (in $A) were slightly higher at 3.6%. The Japanese equities market continued its strong recent run, achieving 12.7% over the month and 49% over the last year to be the standout performing market. The Euro region generally posted solid returns over the month with the standout performers being Italy (9.1%), Portugal (8%), Spain (7.7%) and France (3.3%). Emerging markets (unhedged in $A) returned 1.2% and underperformed developed markets due to softer performance from China, South Korea, Russia and South Africa.

Australian shares

The S&P/ASX300 Accumulation Index returned 4.3%, outperforming hedged global equities. Resources were once again the main detractor from the overall performance of the Index as the Materials sector (-4.4%) lagged the broader market. Over the last year, Materials has substantially underperformed all other sectors returning -14.9%. Domestic unlisted property had another positive month, returning 0.5%, most of which was driven by yield. Listed domestic infrastructure & utilities returned 1.4% and underperformed the broader domestic equities market.

Broad stock market performance – April 2013

(income and capital gain or loss) %
Australian Shares (S&P/ASX 300 Accumulation) 4.3
International Shares (MSCI AC World ex-Aust) 3.6
Global Bonds (Barclays Global Aggregate (Hedged)) 1.3
Cash (UBS Bank Bills) 0.3
Unlisted property 0.5*
Appreciation of $A against $US -0.4
Check out AvSuper’s weekly returns and quarterly performance results

*Estimated Performance as at 7 May 2013

Looking ahead

Recent events in Europe emphasize that the market recovery is still vulnerable to shocks and rapid changes in sentiment. For the time being, investor sentiment appears to be in two camps: one is of the view that the recent market rally isn’t supported by earnings growth, while the other believes that there is a ‘weight of money’ moving from low yielding bonds to into higher returning investments such as equities, property, infrastructure and credit.

We trust you find this information useful in understanding how your AvSuper investment is performing and welcome your feedback on how we can improve the information we provide to you.

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