Investment update for September 2014
A month of poor local performance
Headlines in September were dominated by geopolitical events in Iraq and China, with the latter driving local market moves. Some worse than expected data from China have kept Hong Kong markets down, compounded by pro-democracy demonstrations towards month-end. Iron ore plunged to a five-year low during the month as waning demand in China coincided with a surge in supply. The US economy continued to improve despite the US Federal Reserve’s further tapering of its quantitative easing (QE) program.
The MSCI World ex-Australia Index (hedged into AUD) fell 0.7% over the month. The Australian Dollar depreciated against most major currencies and this resulted in a stronger return of 4.3% (in AUD) on an unhedged basis. Across developed markets, the strongest performing country in local currency terms was Japan with the Nikkei up 4.9% in September. Problems continued in the Eurozone with its economic expansion continuing to stall and inflation slowed to the lowest rate in almost five years. Australian markets The S&P/ASX300 index fell 5.4% this month, which was the biggest monthly loss for the S&P/ASX300 since it dropped 7.3% in May 2012. Small cap stocks performed broadly in-line with large cap stocks. Property Trusts also performed poorly, while unlisted Australian property posted modest growth. Global bonds Australian bonds also performed poorly, following the lead of US Treasuries that started to price in the increasing likelihood of higher interest rates in the US. Long duration bonds and inflation linked securities underperformed for the month. Australian bonds marginally underperformed global bonds (hedged into AUD) while global investment grade credit slightly outperformed global government bonds. Currency The Australian Dollar (AUD) depreciated against most major developed market currencies, including a well-publicised 6.4% depreciation against the greenback. The USD was amongst the strongest performing currencies and posted a record-breaking 11 weeks of successive gains on expectations the Fed will raise interest rates well ahead of its counterparts in Japan and the Eurozone.
Broad stock market performance – September 2014
|Performance (income and capital gain or loss) %|
|Australian Shares (S&P/ASX 300 Accumulation)||-5.4||-0.6|
|International Shares (MSCI AC World ex-Aust) hedged||-0.7||1.6|
|Unlisted property (Mercer Unlisted Property Funds Index (Pre-tax))*||0.5||1.6|
|Global Bonds (Barclays Global Aggregate (Hedged))||-0.1||1.8|
|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 8 October 2014 Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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