Investment update for April 2014
Ukraine and China dampen sentiment
Investor sentiment continued to be dampened throughout April by the ongoing Ukrainian crisis and concerns around economic growth in China. However, risk assets were supported by broadly positive economic data in the developed world. The US Federal Reserve again tapered its quantitative easing program and investors interpreted this as a sign that the economic recovery in the US is gaining momentum. The most recent round of tapering sees monthly bond purchases decline by US$10B to US$45B, with the reduction split evenly between government bonds and mortgage-backed securities. In contrast, conditions in the Eurozone remain depressed and policymakers continue to hint at additional stimulus measures. In Japan, risk assets underperformed due to concerns around the sales tax increase, which took effect at the beginning of the month.
Emerging markets underperformed developed markets on an unhedged basis due to concerns around Chinese growth, and this led to China, along with Russia, being among the weakest performing emerging market countries in local currency terms. From a global sector perspective, Energy was the strongest performer due to fears of a supply shortage if the Ukrainian crisis escalates.
The S&P/ASX300 Accumulation Index (1.7%) outperformed hedged global equities due to improving economic data – mainly a decline in the domestic unemployment rate and lower than expected domestic core inflation. Top 20 stocks were the strongest performers in the Australian market, whilst small cap stocks underperformed and this was broadly in line with the performance of small cap stocks globally. From a sector perspective, Property Trusts was the strongest performer, while Health Care and IT stocks produced negative absolute returns.
The Australian Dollar (AUD) finished the month broadly flat against the US Dollar and underperformed most other major developed market currencies. Over three months, the AUD remains one of the strongest performing currencies as high interest rates relative to the developed world average and low volatility in currency markets has increased the attractiveness of the carry trade.
Broad stock market performance – April 2014
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||1.7||6.9|
|International Shares (MSCI AC World ex-Aust) hedged||1.0||5.8|
|Unlisted property (Mercer Unlisted Property Funds Index (Pre-tax))*||0.5||2.1|
|Global Bonds (Barclays Global Aggregate (Hedged))||0.9||1.9|
|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 9 May 2014 Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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