Investment update for September 2016
A volatile month that ended relatively flat
September was a volatile month with domestic and international markets eventually ending the month relatively flat. International central bank policy remained the key driver of market movements across global markets.
The Australian equity market performance primarily reflected global market activity over the month. The largest movement was on 12 September when the markets reacted negatively to hawkish commentary from a member of the US Federal Reserve. The market continued to trade higher for the remainder of the month. The Reserve Bank of Australia (RBA) unsurprisingly left interest rates on hold at 1.5% in early September.
The MSCI World ex-Australia Index (hedged into AUD) gained 0.3% over the month. The Australian Dollar appreciated in September, which resulted in a return for unhedged overseas equities of -1.3% (in AUD). In developed markets, Austria (4.4%) and Hong Kong (3.6%) outperformed the broader market, while Denmark (-4.9%) and Italy (-3.4%) underperformed. The MSCI Emerging Markets Index (-0.5%) outperformed unhedged developed markets.
US equities were flat over the month with market volatility picking up from a very benign month of trading in August. Economic releases were mixed with payrolls missing expectations and retail sales declining for the first time in five months, while the release of August CPI beat market expectations. The S&P500 Index experienced some weakness before the September Federal Reserve meeting, where interest rates were left on hold.
Most Asian indices ending the month in positive territory. However, the Nikkei Index fell 2.6% as the markets reacted to the Bank of Japan’s (BoJ) meeting in September. The BoJ announced it would start targeting 10-year interest rates, committing to keep them around zero as part of a new policy framework aimed at boosting inflation to its 2% target. Data released on the last day of the month showed that Japanese consumer prices fell for the sixth straight month in August.
The S&P/ASX300 Accumulation Index rose 0.5% in September. Small Cap stocks rose 1.5% for the month, while Large Caps stocks (0.6%) underperformed the broader market. Materials (5.7%) and Consumer Staples (1.6%) stocks outperformed, while Listed Property Trusts (-4.3%) and Telecoms (-4.0%) were the worst performing sectors.
The Australian dollar appreciated in September against the USD 1.8%. This resulted in losses to international equities of -1.3% on an unhedged basis.
The Australian dollar was trading at US$0.7630 as at 30 September 2016.
Source – JANA, FactSet, S&P, MSCI, Mercer, UBS, Barclays
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