Investment update for January 2012

Australian equities had a strong month

Australian equities had a strong month (+5.1%) to start the calendar year. In a period where positive sentiment and strong metals prices drove markets, it was not surprising that the Materials sector was the standout performer, posting a double digit return over the month. Other cyclical sectors of Energy, Industrials, and Consumer Discretionary also performed strongly while the defensive sectors of Consumer Staples, Health Care and Telecoms were comparatively weaker.

Small companies outperformed large caps due to the strong performance of small Resources stocks. Listed property trusts outperformed the broader market due to generally strong performance across the sector but notably, underperformers from last year rebounded strongly driven by positive market sentiment towards the sector. Unlisted property posted a positive return for the month with returns largely reflecting income.

Overseas economic data released in January revealed that US unemployment fell by 0.2% to 8.5% in December and the US Home Builders housing market index reached its highest level since June 2007. This helped bolster optimism and eased market concerns about US growth. In addition, fears of a China slowdown were alleviated due to greater confidence by the markets that the People’s Bank of China would lower the banking Reserve Requirement Ratio to help stimulate growth.

The impact of an improving sentiment in relation to the US and China had a twofold effect. Firstly, cyclical stocks, which bore the brunt of last year’s negative sentiment, rebounded strongly. Secondly, the Material sector rebounded strongly as commodities, driven largely by double digit increases in metals prices over the month, rallied strongly. Stock markets across the world generally had a strong month. It’s good news… for now.

Looking ahead

Investment markets are expected to remain volatile for the time being as market sentiment proves to be closely aligned to political and policy announcements.

Broad stock market performance – January 2012

Performance (income and capital gain or loss) %
Australian Shares (S&P/ASX 300 Accumulation) 5.1
International Shares (MSCI AC World ex-Aust) hedged 1.2
Global Bonds (Barclays Global Aggregate (Hedged)) 1.3
Cash (UBS Bank Bills) 0.4
Unlisted property 0.5
Appreciation of $A against $US 3.7
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

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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