Market Update – April 2013

Investment Market Overview

Over the month, the International Monetary Fund cut its forecast for global GDP growth from 3.5% to 3.3%. Europe seems unable to track a clear path to recovery. A continuing recession and a stubbornly high unemployment rate which has crept above 12% are inhibiting a rebound in European consumer and investor confidence. Despite this, the Euro region equity markets generally posted solid returns over the month. Meanwhile in the US, recent GDP data was slightly below consensus expectations. However, this was offset by improvements to US jobless claims and consumer spending – a net win for continuing improved investor sentiment reflected in the surge of US equity markets. In Japan, local equity markets continued to rally on the back of aggressive monetary easing. In summary, it was a good month for markets in despite the economic uncertainty in Europe.

The MSCI World ex-Australia Index (hedged in $A) was up 3.0% over the month. With the $A weakening against all major currencies except for the yen, unhedged returns (in $A) were slightly higher at 3.6%. Emerging markets (unhedged in $A) returned 1.2% and underperformed developed markets due to softer performance from China, South Korea, Russia and South Africa.

The Australian equity market (S&P/ASX300 Accumulation Index) outperformed hedged global equities returning 4.3%. Resources were once again the main detractor from the overall performance of the Index. Over the last year, Materials has substantially underperformed all other sectors returning -14.9%.

Investments in bonds and loans (broadly called fixed income assets) provided positive returns over the month.

Recent events in Europe highlight that the market recovery is still vulnerable to shocks and rapid changes in sentiment. For the time being, investor sentiment appears to be in two camps: one is of the view that the recent market rally isn’t supported by earnings growth, while the other believes that there is a ‘weight of money’ moving from low yielding bonds to into higher returning investments such as equities, property, infrastructure and credit.




 

Market Performance – April 2013

Performance
(income and capital gain
or loss) %

Month

3 months

Australian Shares (S&P/ASX 300 Accumulation)

4.3

7.3

International Shares (MSCI World ex-Australia) unhedged

3.6

6.3

International Shares (MSCI World ex-Australia) hedged

3.0

7.9

Unlisted Property (Mercer Unlisted Property Funds Index (Pre Tax)*

0.5

2.0

Listed Property Trusts (S&P/ASX 300 Property Trusts Accumulation)

8.2

9.1

Australian Bonds (UBS Composite Index)

1.5

1.9

Global Bonds (Barclays Global Aggregate (Hedged))

1.3

2.9

Cash (UBS Bank Bills)

0.3

0.7

Appreciation of $A against $US

-0.4

-0.5


*Estimate as at 7 May 2013