Investment update for June 2015
The potential Greek exit from the Eurozone loomed
Greece is the word! As an International Monetary Fund (IMF) repayment deadline (30 June) loomed for Greece, the potential for a Greek exit from the Eurozone meant global equity markets were volatile over the month. European markets sold off considerably with the MSCI All Countries Europe Index (Unhedged in AUD) falling by 3.4%. US markets were also impacted by the global volatility, with the S&P500 ending the month 2.1% lower. Japanese equities were similarly impacted by the events in Europe, with the Nikkei 225 losing 1.6% over the month. China’s equity markets deteriorated dramatically over the month and followed a surprise rate cut during the last weekend of June. The Hang Seng declined 4.3% and the Shanghai-Shenzen Composite dropped 7.5% despite government intervention to buoy the tumbling markets.
From a global sector perspective, all sectors retracted over the month with Telecoms (-1.0%) the best performing sector. Utilities (-5.7%) and Materials (-4.6%) were the worst performing sectors. The MSCI World ex-Australia Index (hedged into AUD) retracted by 2.7% over the month. The Australian Dollar marginally appreciated against a basket of developed currencies over June, which resulted in a return of -2.6% (in AUD) on an unhedged basis. Emerging markets (unhedged in AUD) underperformed developed markets with a return of -2.9%, with Asian and South American markets producing particularly weak result.
The yields on 10-year Australian, US, Japanese, Euro and UK Government bonds rose in June, while NZ bonds slightly fell. Long duration bonds underperformed, with inflation linked securities also underperforming the wider market. Australian bonds and global investment grade credit both outperformed global bonds (hedged into AUD).
The S&P/ASX300 Index fell 5.3% over the month. Small Caps stocks retracted by 7.8% and significantly underperformed Large Caps stocks (-4.7%). Telecom stocks (-1.3%) fell the least, while Consumer Discretionary (-10.9%) and Materials (-8.3%) were the worst performing sectors.
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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