Market report
Month ending July 2010
Provided by JANA Investment Advisers
It was a very bumpy ride in the markets in July; however after a poor start share markets finished the month quite strongly. In contrast to the negative investor sentiment that we witnessed in previous months, July saw investors return to shares and other risk assets. This was in part driven by earnings surprises in the US, as well as the long awaited bank stress test results from Europe, which delivered results ahead of expectation. Market attention on the European sovereign debt faded somewhat, though these issues have the potential to return.| Market Performance to 31 July 2010 |
Index Performance (%) |
|||
|
Month |
3 Months |
FYTD |
1 Year |
|
| Australian Shares | ||||
| S&P/ASX 300 Accumulation Index |
4.48 |
-5.96 |
4.48 |
10.04 |
| International Shares | ||||
| MSCI World ex-Australia Index, Unhedged in $A, Gross |
0.75 |
-2.63 |
0.75 |
1.06 |
| MSCI World ex-Australia Index, Hedged in $A, Gross |
5.89 |
-6.04 |
5.89 |
12.96 |
| Property | ||||
| Mercer Unlisted Property Funds Index (Pre Tax) | 0.50 |
2.10 |
0.50 |
3.73 |
| S&P/ASX 300 Property Trusts Accumulation Index (GICS Sector) |
1.10 |
-4.20 |
1.10 |
18.87 |
| FTSE EPRA/NAREIT Global Real Estate Index, Unhedged in $A, Gross | 2.27 |
1.26 |
2.27 |
14.43 |
| Australian Bonds | ||||
| UBS Composite Bond Index (0+ years) |
0.27 |
3.31 |
0.27 |
7.81 |
| International Bonds | ||||
| Citigroup World Government Bond index, Hedged in $A | 0.93 |
3.77 |
0.93 |
9.19 |
| Barclays Capital Global Aggregate Index, Hedged in $A | 1.14 |
3.62 |
1.14 |
11.07 |
| Cash | ||||
| USB Bank Bills index |
0.42 |
1.20 |
0.42 |
4.05 |
| Exchange Rates | ||||
| $A to US Dollar | 7.17 |
-2.75 |
7.17 |
8.89 |
| Australian Trade Weighted Index | 3.19 |
-4.27 |
3.19 |
5.66 |
Financial Markets
The Australian share market returned 4.5% in July, as investors returned to the market chasing bargains thrown up by the slide in May and June. Industrial stocks were the biggest beneficiaries of the rebound, whilst Financial stocks performed strongly, driven by the expectation that the Basel III regulatory changes will be less onerous than initially expected. In addition, Julia Gillard’s appointment resulted in the replacement of the Resource Super Profits Tax (RSPT) by a far milder Minerals Resource Rent Tax (MRRT), which was positive for mining, and mining services stocks. Global share markets in local currency terms also ended the month up 5.9%, a solid improvement from June. With “risk appetite” returning, the Australian dollar rose and this meant that the global market was up only 0.8% in Australian dollar terms.World bond markets were broadly flat for July. Government bond yields in Australia rose slightly, while bond yields in other developed markets experienced a small decline. Credit markets performed well, as concerns about global growth and sovereign debt subsided and credit spreads contracted. Because of lower than expected inflation, international uncertainty, and low credit growth, the RBA kept cash rates on hold during July. The RBA may maintain this stance for some months to come.
Australian unlisted Property valuations are now showing some modest increases for higher quality, well let assets. Valuations have also risen for some Infrastructure assets, with valuers taking a less cautious view of the future than during the GFC.
Globally, some question marks still remain with regards to the size and timing of the recovery in the developed markets and whether the emerging markets are strong enough to drive global economic growth in the absence of developed world growth.
(Catholic Super wishes to thank JANA Investment Advisors for this monthly Market Commentary)
