Investment update for November 2014
Iron ore, oil prices and ASX down
Volatility in November was fuelled by continued slow global, falling iron ore and oil prices, and ongoing geopolitical concerns. The Eurozone annual inflation rate fell to 0.3 per cent in November from 0.4 per cent in October. The drop in inflation is putting greater pressure on the European Central Bank to follow the lead of the Bank of Japan and the US Federal Reserve and launch a large-scale quantitative easing program. Oil prices have continued to plummet. The recent decision by OPEC to reject calls for oil production cuts has had a particularly dampening effect. Iron ore lost another 11% in the month of November and is around 50% of its value at the beginning of the year. While geopolitical risks subsided marginally in November, tensions between Ukraine and Russia have recently escalated again with reports that fighting had returned to peak levels.
The MSCI World ex-Australia Index (hedged into AUD) appreciated 3.4% over the month. The Australian Dollar depreciated against most major developed world currencies, this resulted in a stronger return of 5.4% (in AUD) on an unhedged basis. Across developed markets, the strongest performing regions in local currency terms were Germany, Belgium and Japan. The weakest performing regions in local currency terms were Norway, Portugal and Australia. Emerging markets (unhedged in AUD) lagged developed markets. The markets of Brazil, Russia and Indonesia all lagged developed markets in local currency terms. From a sector perspective, Telcos and Health Care led the way while Materials and Energy struggled on the back of continuing weak oil prices and mixed performance from commodities. Consumer Staples was another sector to finish the month deep in the red.
The S&P/ASX300 Index wiped off most of the gains from October, contracting 3.2% over the month. The biggest detractors to performance were Consumer Staples and Resources with the ASX All Resources declining 9% over the month. Large Caps and Small Caps both recorded a negative month. Small Caps were dragged down by Small Resources that, once again, suffered due to market concerns in relation to Chinese economic growth and the consequent impact on Oil and Iron Ore prices. From a sector perspective, Telecoms and Health Care led the way while Materials and Energy struggled on the back of continuing weak oil prices and mixed performance from commodities.
Over the month, the yields on 10-year Australian, US, UK, and Japanese Government bonds all tightened. Long duration bonds and inflation linked securities therefore had a good month. Australian bonds marginally outperformed global bonds (hedged into AUD) while global investment grade credit underperformed global government bonds.
Broad stock market performance – November 2014
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||-3.2||-4.5|
|International Shares (MSCI AC World ex-Aust) hedged||3.4||4.1|
|Unlisted property (Mercer Unlisted Property Funds Index (Pre-tax))*||0.5||2.0|
|Global Bonds (Barclays Global Aggregate (Hedged))||1.2||2.0|
|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 4 December 2014
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.