Investment update for March 2013
Renewed concerns about Europe
Over March, investor confidence was shaken by events in Cyprus and the possible implications for the broader European region. The plan for Cyprus to impose a tax on bank deposits quickly raised concerns for a banking crisis and potentially become a ‘template’ policy solution for other “debt-troubled” European nations. The US S&P500 index continued its recent stellar run and managed to reach new all time highs by month end. This was an extraordinary result considering recent sentiment about Europe and China, as well as the automatic cuts that will remove US$85B from US agency budgets between March and October. In Japan, equity markets continued to rally on the back of strong US data combined with increasing optimism that Japan would continue to pursue aggressive monetary easing.
The MSCI World ex-Australia Index (hedged in $A) was up 3.1% over the month. With the $A strengthening against all major currencies, unhedged returns (in $A) were slightly weaker at 0.7%. The major markets of the US (3.8%), the UK (1.2%) and Japan (7.0%) achieved good returns over the month, while the Euro region generally posted more subdued returns due to concerns about Cyprus. Emerging markets (unhedged in $A) returned 3.5% and underperformed developed markets due to weaker performance from China, South Korea and Russia.
The S&P/ASX300 Accumulation Index underperformed hedged global equities returning -2.3%, its first negative month in ten months. Resources were once again the main detractor from the overall performance of the Index as the Materials sector (-9.6%) significantly lagged the broader market. Other sectors that recorded negative results over the month were Energy, Industrials, Consumer Staples, Health Care and Telecoms. The best performing sector of the market was Consumer Discretionary while Financials, IT and Utilities were all flat.
Broad stock market performance – March 2013
(income and capital gain or loss) %
|Australian Shares (S&P/ASX 300 Accumulation)||-2.3|
|International Shares (MSCI AC World ex-Aust)||0.7|
|Global Bonds (Barclays Global Aggregate (Hedged))||0.8|
|Cash (UBS Bank Bills)||0.3|
|Appreciation of $A against $US||1.8|
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*Estimated Performance as at 8 April 2013
Recent events in Cyprus emphasise that market recovery is still vulnerable to shocks and rapid changes in sentiment. For the time being, investor sentiment appears to be in two camps: one is of the view that the recent market rally isn’t supported by earnings growth, while the other believes 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.