Investment update for February 2013

The bulls continue to reign

In what has become a consistent theme recently, equity markets generally edged higher in response to various stimulatory activities in the major economic zones and improved investor sentiment. 

In the US, reporting companies are generally beating analyst expectations, and the housing sector continues to recover. However, consideration must be given to looming automatic US budget cuts that will remove US$85B from US agency budgets between March and October. In Europe, southern European markets wobbled against the backdrop of uncertainty following the Italian election which left control of its parliament in limbo. In Japan, market observers gained comfort that the new Bank of Japan chief would continue pursuing aggressive monetary easing.

International shares

The MSCI World ex-Australia Index (hedged in $A) was up (1.6%) over the month. With the $A weakening against the $US and yen, unhedged returns (in $A) were slightly stronger (2.0%).   The major markets of the US (1.3%), the UK (1.9%) and Japan (3.8%) posted good results, while the Euro region struggled on the back of weaker equity market performance from Germany, Italy and Spain. Emerging markets (unhedged in $A) (0.6%) underperformed developed markets due to weaker performance from Argentina, Brazil, China, India and South Africa. 

Australian shares

The S&P/ASX300 Accumulation Index achieved a very strong return in February (5.3%), significantly outperforming hedged global equities.  Large caps (6.0%) were again the standout segment of the Index, driven higher by Industrial stocks. Small Caps again lagged the broader Index, dragged down by small Resources names. Apart from Materials, all sectors achieved positive returns over the month  Of note, over the last twelve months the S&P/ASX 100 Industrials Index has achieved +39% while the S&P/ASX Small Ordinaries Resources Index has significantly lagged, posting -35%, highlighting the strong performance of Industrials and the weaker performance of the Resources sector.

Broad stock market performance – February 2013

(income and capital gain or loss) %
Australian Shares (S&P/ASX 300 Accumulation) 5.3
International Shares (MSCI AC World ex-Aust) 2.0
Global Bonds (Barclays Global Aggregate (Hedged)) 0.8
Cash (UBS Bank Bills) 0.2
Unlisted property 0.5*
Appreciation of $A against $US -1.9
Check out AvSuper’s weekly returns and quarterly performance results

*Estimated Performance as at 7 March 2013

Looking ahead

In spite of recent softer Chinese data and the looming US budget cuts, risk assets generally continue to perform well.  For the time being, investor sentiment appears divided between one view that the recent market rally is not supported by earnings growth, and the other view that there is a ‘weight of money’ moving from bonds to equities which will continue to support equity prices.

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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