Market Update – August 2013

Market Commentary

Global equity markets fell over the month despite strong US employment data and upwardly revised GDP forecasts. These reignited fears that the US Federal Reserve will begin winding down its quantitative easing program. Weaker sentiment was further reinforced by rising tensions in the Middle East and the possibility of a US led intervention in the ongoing civil war in Syria.  The MSCI World ex-Australia Index (hedged in to $A) fell 2.0% over the month while the decline of the $A against most major currencies resulted in unhedged returns (in $A) falling 1.5%.

However the Australian shares market, the S&P/ASX300 Accumulation Index, was up by 2.5%  as favourable economic data from China led to strong returns from most cyclical sectors, particularly broad and small cap resources.  Materials, Industrials, Energy and Consumer Discretionary were the strongest performing sectors over the month. Not surprisingly, the mid and small cap sectors outperformed the large caps sector which was dragged lower by the weaker relative performance of Financials and Property Trusts.

Investment returns of the major markets over one and three months are shown below.




 

Market Performance – August 2013

Performance
%

Month

3 months

Australian Shares (S&P/ASX 300 Accumulation)

2.5

5.4

International Shares (MSCI World ex-Australia) unhedged

-1.5

8.4

International Shares (MSCI World ex-Australia) hedged

-2.0

0.5

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

0.5

2.4

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

-0.1

-1.7

Australian Bonds (UBS Composite Index)

-0.3

-0.5

Global Bonds (Barclays Global Aggregate (Hedged))

-0.2

-0.8

Cash (UBS Bank Bills)

0.2

0.7

Appreciation of $A against $US

-0.8

-7.1


*Estimate as at 9 September 2013

The Australian listed property produced negative returns over the month and quarter. The same pattern was observed for fixed interests (government bonds).

As we noted last month, markets appear highly prone to rapid changes in sentiment driven by geopolitics and government economic policy.