Investment update for March 2016
Asian volatility continues in a solid month
Australian and most global equity markets performed strongly in March, largely due to central bank activity and positive sentiment in global markets.
Stimulated by the recovery in oil prices from February lows and unchanged US Federal Reserve interest rates, the US market rallied in March, and was significantly less volatile than in February. The S&P500 ended the month 6.6% higher.
The European Central Bank cut its deposit rate further into negative territory in early March. Late in the month, the attack in Brussels weighed on the index, although market losses were reversed on the back of dovish statements from US Federal Reserve Chair Janet Yellen.
Asian equity market volatility continued in March. The Shanghai Composite Index bounced around during the month, reacting to numerous domestic and international economic data releases, but the general upward trajectory produced a gain of 11.6% for the month. The Nikkei Index rose 4.6% in March, despite the Bank of Japan (BoJ) refraining from further stimulus.
The Australian market performed well in March despite global macroeconomic fears. Positive sentiment drove markets higher early in the month, after GDP growth on an annualised basis for the December quarter exceeded expectations. The market did react negatively to ANZ raising its Bad and Doubtful Debts expense by $100M in late March but was also encouraged by Yellen’s continued low-interest stance and recovered.
The S&P/ASX300 Accumulation Index rose 4.8%. Small Cap stocks returned 5.8% for the month, outperforming both the broader market and Large Caps stocks (4.6%). Energy (6.2%), Materials (6.1%) and Financials (5.9%) stocks also outperformed, while Health Care (-0.4%) was the worst performing sector.
The Australian Dollar appreciated in March, up 7.7% against the USD. This translates in international equities to a return of -0.9% (in AUD) on an unhedged basis.
The AUD was trading at US$0.7657 as at 31 March 2016.
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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