Investment update for March 2015
Higher US dollar has broad influence
As financial markets looked ahead, concerns over interest rate hikes and a higher USD put downward pressure on the US equity market, which weakened in March. Volatility increased over the month, following fairly benign conditions in February. US economic data remains robust including a continued decline in unemployment and improved consumer confidence and spending.
In Europe the European Central Bank initiated its bond buying program at the start of March resulting in a rally across bond, credit and equity markets. 10 year German government bonds yields fell to 0.21%, while British markets moved more in line with the US, reflecting its more advanced recovery.
Japanese equities continued to rally with the Nikkei225 adding 2.2% in March. Singapore (1.3%) and Hong Kong (0.3%) strengthened at month end as Chinese authorities eased home lending restrictions and removed some of the barriers preventing investments leaving the country. The Chinese Government have revised down its expected annual growth rate from 7.5% to 7.0% during the month. From an Australian perspective less growth is coming from the manufacturing sector, which in addition to increased supply is impacting on commodity prices.
The MSCI World ex-Australia Index (hedged into AUD) contracted by 0.2% over the month. The Australian Dollar depreciated against most developed currencies over March and this resulted in a positive return of 1.0% (in AUD) on an unhedged basis. The strongest performing developed markets in local currency terms were Denmark and Germany, while Greece and New Zealand were the weakest. Emerging markets unhedged in AUD returned 1.0%, which was in line with developed markets. From a global sector perspective, Health Care and Consumer Discretionary were strong and not surprisingly Materials and Energy were the worst performing sectors.
The Reserve Bank of Australia left rates unchanged at 2.25% in March as Sydney’s booming property market, coupled with increased loan credit growth, reduced the RBA’s appetite for a more aggressive easing policy. Interest rate uncertainty and volatile commodity pricing created uncertain conditions for the domestic share market, which finished the month slightly lower for the month.
The S&P/ASX300 Index fell 0.1% over the month. Small Caps continued to underperform falling -1.9%. Resources stocks struggled as the S&P/ASX300 Resources Accumulation Index fell 6.2%. Energy (-5.7%) and Materials (-4.5%) were the worst performing sectors, while IT (3.7%) outperformed for the month.
U.S. dollar strength continued to dominate currency markets, although the dollar did noticeably retrace early month gains. The euro (down 4.2%) and other European currencies like the British pound (down 3.9%) continued to depreciate against the surging dollar. The Brazilian real (down 11.1%) continued to sell off dramatically on the deepening of the Petrobras scandal, declining oil prices, and rate hikes which are proving impotent against a tailspin of currency-induced inflation. The Australian dollar (down 2.4%) fell on rate-cut expectations.
Broad stock market performance – March 2015
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||-0.1||10.3|
|International Shares (MSCI AC World ex-Aust) hedged||-0.2||5.4|
|Unlisted property (Mercer Unlisted Property Funds Index (Pre-tax))*||0.4||1.3|
|Global Bonds (Barclays Global Aggregate (Hedged))||0.8||2.6|
|Cash (UBS Bank Bills)||0.2||0.7|
|Check out AvSuper’s weekly returns and quarterly performance results Please note that past performance is not always a reliable indicator of future performance.|
*Estimate as at 7 April 2015
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.