Investment update for July 2010

It was a very bumpy ride again in July, however investment markets ultimately finished the month in positive territory with investors returning to higher risk asset classes. This was driven in part by earnings surprises in the US, as well as the long awaited bank stress test results from Europe, which delivered results ahead of expectation.

Markets rally as fears subside

The Australian sharemarket (ASX300) returned 4.5% in July, as investors returned to the cyclical stocks that they had fled from.  Industrial stocks were the biggest beneficiaries of the rebound, whilst Financial stocks also performed strongly. In addition, the replacement of the Resource Super Profits Tax (RSPT) by a Minerals Resource Rent Tax (MRRT) was positive for Material stocks. Global share markets in local currency terms ended the month up 5.9%, a solid improvement from June including:

  • regional level – the Greek stock market posted the greatest increase, rising by 22.9%
  • aggregate level -emerging markets continued to outperform developed markets
  • sector level – Financials, Telecommunications, and Materials stocks performed well, whilst the defensive Healthcare and Consumer Staples sectors posted negative returns

World bond markets were broadly flat for July.  Credit markets performed well, as the concerns about global growth and sovereign debt subsided.  Given lower than expected inflation results and low credit growth, the RBA kept cash rates on hold during July.

Looking ahead

While there has been positive momentum across most of the market, question marks still remain over the recovery in the developed markets and whether emerging markets are strong enough to drive global economic growth in the absence of developed world growth.  Whilst July finished up in positive territory, market returns were volatile.  The markets remain very reactive to short term announcements, and it may not be smooth sailing for some time yet.

Broad stock market performance – July 2010

Performance (income and capital gain or loss) %
Australian Shares (S&P/ASX 300 Accumulation)  4.5
International Shares (MSCI AC World ex-Aust) hedged  5.9
Global Bonds (Barclays Global Aggregate (Hedged)) 1.1
Cash (UBS Bank Bills) 0.4
Appreciation of $A against $US 0.4
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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