Investment update for May 2011

Overall, May has seen a decline in commodities, the Australian dollar and the broader global and Australian shares markets. On the back of weaker economic data from the US and Europe, oil had its largest weekly decline since December 2008 but then recovered some ground before month’s end. The weaker economic data triggered a sell down in equities and a rally in bonds. Weaker commodity prices also triggered a small sell off in the $A, helping to offset weaker equity markets on an unhedged basis.

Australian equities were down with the decreased commodity prices. The Resources sector had a poor month but still show overperformance results for the entire year. Energy, Materials, Consumer Discretionary, Financials and Information Technology had weak performances in May, while Consumer Staples, Industrials, Telecommunications and Utilities performed strongly. Small businesses continue the three month trend of underperforming compared to large companies. Listed Property Trusts were flat for the month, while Unlisted Property outperformed listed property, with returns largely reflecting income.

Global equities were marginally down on a hedged basis, and with the Australian dollar weakening against most major developed currencies, unhedged returns rose during the month. Asia excluding Japan had a strong month and Emerging Markets and Latin America were flat, while the USA, UK and broader Europe were all down. Within Europe, Portugal and Switzerland performed well, while Finland, Ireland and Italy were weak, with Greece faring worst due to continuing concerns about their sovereign debt.

Amongst the broad cap market sectors, Consumer Discretionary, Consumer Staples, Health Care and Telecommunications all performed strongly, while Energy, Materials and Industrials struggled.

Short-term interest rates in developed economies remain low, although China and India have recently raised their rates in response to emerging inflationary pressures; further rate tightening in China is likely. Australian bonds and global bonds performed strongly on the back of renewed risk aversion from investors. Despite the volatility in equity markets, negative news (European Sovereign Debt, weaker US data), and strong US Corporate Bond supply, credit is continuing to be surprisingly resilient.

Looking ahead

Global stock markets generally declined in May and volatility continues with mixed data from the USA and European sovereign debt concerns. All of these uncertainties will keep investor and consumer sentiment fragile, so most liquid markets are expected to remain volatile for the time being.

Broad stock market performance – May 2011

Performance (income and capital gain or loss) %
Australian Shares (S&P/ASX 300 Accumulation) -2.0
International Shares (MSCI AC World ex-Aust) hedged 0.7
Global Bonds (Barclays Global Aggregate (Hedged)) 1.4
Cash (UBS Bank Bills) 0.4
Unlisted property 0.5
Appreciation of $A against $US -2.6
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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