Market Update – July 2013

Market Commentary

After spooking markets in June with comments indicating a potential tapering of US asset purchasing program, US Federal Research Chairman Bernanke eased market concerns by stating that there was no set schedule for ending the asset purchasing program. The US Federal Open Market Committee minutes indicated support for a continuation of quantitative easing and the low interest target of 0.25% for the foreseeable future.

The European Central Bank, the Bank of England and the Bank of Japan also maintained their supportive policies. Notably, Eurozone economic data showed some positive signs of improvement, with some economic measures making the most improvement in two years. In response to concerns about the robustness of Chinese economic growth, the Chinese authorities announced a range of stimulus measures and stated a desire to maintain economic growth above 7%. In summary, as shown below markets responded positively to central bank announcements indicating a continuation of stimulatory measures.




 

Market Performance – July 2013

Performance
%

Month

3 months

Australian Shares (S&P/ASX 300 Accumulation)

5.3

-1.9

International Shares (MSCI World ex-Australia) unhedged

7.5

19.9

International Shares (MSCI World ex-Australia) hedged

5.1

4.8

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

0.5

2.5

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

-0.7

-5.3

Australian Bonds (UBS Composite Index)

0.9

-0.3

Global Bonds (Barclays Global Aggregate (Hedged))

0.6

-1.9

Cash (UBS Bank Bills)

0.3

0.7

Appreciation of $A against $US

-2.0

-13.5


*Estimate as at 8 August 2013

Apart from Japan (-0.4%), all major developed market regions posted positive returns over the month. Europe was the main benefactor of the market rally largely due to more positive economic data for the region. Emerging markets (unhedged in $A) achieved +3.1% over the month.

Australian shares performed broadly in line with hedged global equities, returning 5.3% over the month. Given China’s efforts to stimulate economic activity, it was not surprising that Resources were the main driver of overall performance of the Index. Large caps continued their recent strong run and outperformed the broader market. From a sector perspective, the cyclical sectors of Energy, Materials and Consumer discretionary led the way along with the Financials sector which continued its recent strong run.

Australian listed property stocks had a weak month returning -0.7%. The sector is now well behind the broader Australian equity market over the last year. Fixed interest investments (bonds) had a solid month in aggregate.

Recent events highlight that the market recovery is prone to rapid changes in sentiment driven by government policy and stimulus announcements.