Market Update – October 2013

Market Commentary

Following a 17 day shutdown the US government “re-opened” mid-month as the Republican controlled House of Representatives and Democrat led Senate agreed to pass yet another continuing resolution which sees the government funded through to mid-January 2014. Steady developed world growth, but at levels below what is required to warrant a reduction in stimulus, had a positive effect on both stocks and bonds. Data released during the month confirmed that the Spanish economy grew, contributing to perceptions of a broad based economic recovery in the Eurozone. However, overall conditions in the Eurozone remain depressed and many indicators point toward a need for further easing of monetary conditions in all countries except Germany. In China, data releases were ahead of expectations but sentiment was moderated by ongoing concerns about financial sector stability.

The investment returns of the major markets for one and three months to 31 October 2013 are summarised below.




 

Market Performance – October 2013

Performance
%

Month

3 months

Australian Shares (S&P/ASX 300 Accumulation)

3.9

8.9

International Shares (MSCI World ex-Australia) unhedged

2.6

1.1

International Shares (MSCI World ex-Australia) hedged

4.1

6.1

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

0.5

2.1

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

2.6

3.5

Australian Bonds (UBS Composite Index)

-0.1

0.1

Global Bonds (Barclays Global Aggregate (Hedged))

1.1

1.9

Cash (UBS Bank Bills)

0.2

0.7

Appreciation of $A against $US

1.3

5.5

The MSCI World ex-Australia Index (hedged to $A) rose 4.1% over the month but the appreciation of the $A against most major currencies resulted in a lower return of 2.6% (in $A) on an unhedged basis. Across developed markets the strongest performers in local currency terms were the peripheral European countries of Italy, Greece and Spain as stocks re-rated based on improved sentiment. The weakest returns came from Japan, Portugal and Sweden.

In Australia the S&P/ASX300 Accumulation Index was up 3.9%. The RBA left the Australian Cash Rate unchanged at 2.5% in October and commented that the foundation is in place for a recovery in the non-mining sectors of the economy. The S&P/ASX 300 Property Trusts Index produced a positive absolute return but lagged the broader Australian equity market whilst outperforming unlisted property.  

Australian bonds provided mediocre returns, lagging global bonds (hedged to $A) which produced pleasing returns over the month and quarter.