Investment update for February 2016
Low global growth sets the stage
Australian and global equity markets retraced in February, largely due to central bank activity and low global growth. The China and Japan stock markets remained in focus, and—as macroeconomic factors drove increased volatility throughout the month—oil remained a talking point.
Concerns over the US Federal Reserve’s ability to raise rates in the near future pushed the US market down slightly in February, with the S&P500 ending the month down 0.4%. Asian equities were again volatile. The Shanghai Composite Index managed a mid-month recovery, only to sell off again, eventually finishing down 1.8%. The MSCI Japan index finished the month down 9.3%, as investors expressed fresh concerns about the Bank of Japan’s ability to influence the market.
Performance was poor across developed markets. New Zealand (3.7%) and Singapore (2.2%) outperformed the MSCI World ex-Australia Index (hedged into AUD), which fell by 1.3% in February. Alongside Japan, Greece was the worst performer for the month, falling 10.5%. The MSCI Emerging Markets Index (-1.1%) slightly outperformed developed markets.
The Australian reporting season was fairly well received, with subdued revenue growth, driven largely by falling input costs for materials and helped by a lack of wage pressure. The resources sector was behind most downgrades.
Global macroeconomic factors saw the S&P/ASX300 Accumulation Index fall 1.8% in February. Small Cap stocks returned 0.9% for the month, outperforming the broader market and Large Caps stocks (-2.5%), while Mid Cap stocks (1.4%) outperformed. Materials (9.1%), Industrials (5.8%) and Property Trusts (2.8%) stocks outperformed, while Financial (ex-Property Trusts) (-9.12%) was the worst performing sector.
The Australian Dollar appreciated in February, which resulted in a return of -1.6% (in AUD) on an unhedged basis. The AUD was trading at US$0.71291 as at 28 February 2016.
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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