Investment update for September 2013

Central Banks and Politicians Fight for the Driver’s Seat

International shares

Central bank policy again drove global markets, as investors responded to the US Federal Reserve’s decision to delay tapering its quantitative easing program. Along with better than expected economic data from Europe and China, the prospect of prolonged stimulus improved sentiment and led to strong performance by assets leveraged to the economic cycle.

Further support for growth assets came from the political front as the United States and Russia allayed market fears of a US military strike in Syria. However, this political support faded rapidly toward the end of the month as a looming US government shutdown and potential confidence vote in Italy rocked markets. While the Italian issue was eventually resolved, markets will closely watch negotiations over the US government shutdown and looming debt ceiling debate in October.

The MSCI World ex-Australia Index (hedged to $A) rose 3.9% over the month, while the strong appreciation of the $A against most major currencies resulted in a flat return (in $A) on an unhedged basis. Emerging markets (unhedged in $A) outperformed developed markets, returning 1.5% as index heavyweights China and Brazil produced returns in excess of 5%. From a sector perspective, Industrials and Consumer Discretionary stocks produced strong returns while Energy, Consumer Staples and Health Care detracted from performance.

Australian shares

The S&P/ASX300 Accumulation Index (+2.2%) underperformed hedged global equities, as improved business and consumer confidence has not yet brought about stronger economic activity. Industrials, Information Technology and Consumer Discretionary were the strongest performing sectors over the month, while Health Care was the only sector to record a negative absolute return. Within the small cap universe there was a large divergence between the Industrials and Resources sectors with the former outperforming the latter by 10%. Mid caps was the standout segment of the Australian market while top 20 stocks lagged.

Broad stock market performance – September 2013

(income and capital gain or loss) %
Australian Shares (S&P/ASX 300 Accumulation) 2.2
International Shares (MSCI AC World ex-Aust) 0.0
Global Bonds (Barclays Global Aggregate (Hedged)) 1.0
Cash (UBS Bank Bills) 0.2
Unlisted property 0.5
Appreciation of $A against $US 5.0
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Currency markets

The $US weakened against most major currencies. The balance of payments crisis playing out in certain emerging markets has moderated recently, as governments and central banks in affected nations have taken steps to contain outflows of capital, and this has provided support to the currencies of these economies.

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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