http://www.plum.com.au Welcome to the Plum Financial Services Monthly Market Commentary feed (www.plum.com.au/microsite/marketwatch) en-us Plum Financial Services Limited Tue, 8 June 2010 15:11:59 GMT Plum http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/files/1/News.gif pfs@plum.com.au 16 http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp April 2010
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]]> Australian shares
In Australia, the market returned -1.3 per cent, with defensive sectors the hardest hit. Resources stocks struggled prior to the release of the findings of the Henry Tax review, as the market speculated on the negative impact that this report would have on the sector. The Healthcare sector was negatively impacted by the poor results of one of CSL’s overseas competitors, whilst Woolworth’s sales results dampened the returns for the Consumer Staples sector. Telecommunications was the only sector to post positive returns, driven by the performance of Telstra, as the market priced in the expectation of a national broadband network deal with the Government occurring in the short term. Merger and acquisition activity continued to occur in the Mining and Resources sectors, but was also at play in the Consumer Staples, Financials and Energy sectors. ]]> International shares
Global shares markets were weak, returning -1.3 per cent, however another good month for the Australian dollar saw hedged investors return a positive 0.7 per cent for the month. It was no surprise that European markets drove the negative performance, whilst returns in China, Thailand and Japan were also negative. At a sector level, Healthcare, Telecommunications and Consumer Staples stocks underperformed, whilst the Consumer Discretionary, Industrials and Information Technology sectors outperformed. Emerging Markets continued to outperform Developed markets but returns were diverse, ranging from -6.6 per cent in Israel to as high as 10.0 per cent in Egypt. ]]> Property
Amidst falling local and global share markets, the property sector provided some relief for investors. Local listed property rebounded 3.9 per cent over the month, whilst Global unlisted property continued its recent upward trajectory by gaining 0.5 per cent through April. ]]> Australian and international fixed interest
Global bond markets outperformed Australian bond markets, in a month that saw domestic bond markets return to positive territory. Overseas markets performed better as bond yields rallied, with credit benefiting from high running yields, along with some limited spread contraction. ]]> Investment Market Update

Market returns reflected concerns over European sovereign debt issues, particularly in Greece...

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]]> Australian shares
Markets continued to rally in March following on from a positive February, with both Australian and global shares rising at a decent rate. In Australia the markets rallied 5.7 per cent, with cyclical shares benefiting from a positive domestic outlook. Resource shares benefited from the recovery in Asia as well as resurgence in merger and acquisition activity with a number of bids for mining companies. ]]> International shares
Global shares were also higher, rising by 6.8 per cent on a fully hedged basis - however a higher Australian dollar saw unhedged returns lower at 3.6 per cent. The majority of countries had a positive month with Japan and some smaller European markets leading the pack. In the sectors, Healthcare and Utilities underperformed while Materials and Financials outperformed. Emerging Markets outperformed Developed markets but returns were diverse, ranging from -2.4 per cent for Chile to as high as 17.1 per cent for Hungary. ]]> Property
Listed Property Trusts returns were largely flat for the month and Unlisted Property Trusts are expected to show stable returns for the month. ]]> Australian and international fixed interest
Bond market returns were mixed, with rate rises in Australia leading to a negative return for the bond market, while overseas markets performed better as credit spreads continued to contract giving further modest capital gains. World Central Banks have again kept cash rates stable, and have indicated that this stance will remain until economic conditions recover. In Australia the RBA is expected to raise the cash rate further in the months ahead. ]]> Investment Market Update

March was a strong month for share markets around the world...

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]]> Australian shares
The Australian share market rise of 2.1 per cent was broadly based, with both resources and industrials rising at a similar rate. Small Caps were weaker than the overall market with a decline in small resources partially offset by a rise in small industrials. ]]> International shares
The theme in Australia translated to the Global share markets, with hedged global shares also up by 2.2 per cent, but dragged slightly lower by weaker performance in the emerging markets. European markets generally lagged on concerns of the Greece debt issue while the US was stronger. ]]> Property
Listed Property trusts returns were consistent with ordinary shares, and Unlisted Property trusts have generally stabilised after a disappointing 2009. ]]> Australian and international fixed interest
The ongoing uncertainty continued to affect bond markets and government bond yields fell, albeit at a slower pace than in January. This resulted in positive returns from Australian and global bond markets, both of which outperformed Cash. World Central Banks have kept cash rates stable, but the RBA raised the cash rate by 25 basis points to 4 per cent in early March. ]]> Investment Market Update

Markets clawed back some of the ground lost in the prior month, but are still grappling with a number of concerns...

Read the full version of this article by downloading the PDF version.]]> February 2010 Read more /microsite/marketwatch/download/Monthly_February2010.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp January 2010
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]]> Australian shares
Australian shares fell during January with resource stocks suffering more than industrial stocks and small companies falling further than larger companies. Resource stocks fell on concerns that commodity prices might struggle after the Chinese authorities announced a pull back of the stimulus package that has propelled domestic demand. ]]> International shares
Global shares were also weak over the month falling 3.2 per cent on a hedged basis. In Europe, the countries with debt issues were weak, as were shares of Germany and France, while US and Japanese shares performed roughly in line with the benchmark. Unhedged shares performed a little better as the Australian dollar weakened against the US dollar and Yen but was stronger against the Euro. ]]> Property
Listed Property Trust returns were better than ordinary shares but still fell in value, while unlisted property was stable. Property sales are becoming more common as buyer’s and seller’s expectations on price appear to be converging. ]]> Australian and international fixed interest
Even with the uncertain environment surrounding several European countries’ debt, bond markets generally posted solid returns over the month. Globally central banks have kept cash rates stable, and, post the month end, to the surprise of almost all market experts, the RBA left the cash rate unchanged. ]]> Investment Market Update

January saw a reversal of investment sentiment; with some scepticism regarding how much of the initial economic recovery is ‘real’ growth and how much is just inventory restocking...

Read the full version of this article by downloading the PDF version.]]> January 2010 Read more /microsite/marketwatch/download/Monthly_January2010.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp December 2009
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]]> Australian shares
Australian shares rose by 3.7 per cent in December to finish off a sterling year with a rise of nearly 38 per cent. Small Companies outperformed, rising by 4.3 per cent over the month and 57 per cent for the year. All sectors rallied, but Telecommunication and Consumer Staples lagged other sectors. The latter part of 2009 saw a return of merger and acquisition activity, which also pushed selective stocks higher. ]]> International shares
Unhedged Global share market returns were in line with Australian shares, up 3.6 per cent for the month, but are largely flat over the 12 month period due to the rising value of the Australian dollar ($A) offsetting the recovery in prices. Hedged investors fared much better, with prices rallying by 27.5 per cent over the year. During the month the best performing sectors included Information Technology and Consumer Discretionary, while Financials underperformed as banks were largely unchanged for the month. Emerging Markets again outperformed, with Korea and Russia leading the pack. ]]> Property
Listed Property Trusts returned 3.4 per cent for the month, marginally underperforming the broader equity market, as investors show renewed confidence that the worst of the commercial property market is now behind us. Some larger property transactions occurred late in the quarter, providing comfort that the falling valuations may be near an end. ]]> Australian and international fixed interest
Bond markets produced negative returns in December as yields on government bonds rose sharply late in the month. Credit (non-government bonds) spreads have stopped contracting for the moment as buyers seem to be content to enjoy the still high running yield available on good quality assets. ]]> Investment Market Update

Recent months have seen some recovery in world economic growth off a depressed base...

Read the full version of this article by downloading the PDF version.]]> December 2009 Read more /microsite/marketwatch/download/Monthly_December2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp November 2009
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]]> Australian shares
Australian shares were boosted by resources, which in part was offset by the weaker performance of Industrial stocks. The well-performed Financial and Information Technology sectors saw some profit taking; however the Telecommunication and Consumer Staples sectors were a little stronger than the broader market as investors took comfort from solid retail sales figures. Resource shares surged as commodity prices rose, while merger and acquisition activity continued to bubble beneath the surface, with Chinese investors showing interest in a range of companies. The market continues to see capital raisings, while the Myer float in early November 2009 and Kathmandu shortly after, saw the first private equity floats for some time. There are expectations for further floats in months ahead with a number of names soon to list. ]]> International shares
In offshore share markets the unhedged MSCI World index rose by 2.8 per cent in November. Due to the marginal increase in the Australian dollar, the hedged return was higher at 3.4 per cent. As with Australian shares, the resource related sectors performed strongly, as did Healthcare, however Financials and Energy stocks underperformed. The return on Emerging Market shares matched those for Developed Markets but there was a wide dispersion of returns in November ranging from -17.5 per cent for Greece ahead of their ratings downgrade, to as high as 5 - 6 per cent for the USA, Norway and Canada. ]]> Property
In property markets, Listed Property Trusts rose slightly but unlisted property trusts still experienced moderate falls in valuations, which some commentators feel may bottom during the December quarter. ]]> Australian and international fixed interest
Australian bonds showed a modest positive return with government bonds outperforming non-government bonds which weakened towards the end of the month under the influence of profit-taking. Global bonds showed a similar pattern as bond yields declined to give some small capital gains. This activity was due to investors moving to the security of bonds as economic activity in countries such as Japan showed signs of a relapse. In Australia the Reserve Bank has reacted to better economic prospects by starting to raise rates, and to date have pushed up the cash rate by 0.75 per cent from the low of 3.0 per cent seen earlier in the year. ]]> Investment Market Update

There are more signs that the global economy is improving...

Read the full version of this article by downloading the PDF version.]]> November 2009 Read more /microsite/marketwatch/download/Monthly_November2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp October 2009
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]]> Australian shares
For the month, Australian shares fell by 2.1 per cent, breaking a seven month rally, with defensive sectors such as Consumer Staples, Utilities and Telecommunications again coming to the fore. Smaller Companies and Resources were a little stronger than the broad market. The share market continues to experience large capital raisings while the Myer float in early November saw the first private equity float for some time with a host of others waiting in the wings. ]]> International shares
Global share markets also fell during the month, with unhedged shares falling by 4.1 per cent over the month, however some further strength in the Australian Dollar saw hedged investor returns fall by less than 1.9per cent. Global activity remains mixed with US and European unemployment at over 10 per cent, acting as a negative for investor confidence, while the manufacturing sector continues to recover off a low base. As with Australia, consumer related stocks held up better while the Financialssector saw some profit-taking.Utilities and Information Technology also underperformed. The major European markets of Germany, France and Italy lagged as their exports continue to struggle. Emerging market shares also fell but by less than developed markets. China continues to lead the way with another 6.5 per cent rally to be 82 per centhigher over the past year. ]]> Property
Listed property markets retreated over the month after several months of strong returns. Domestic unlisted property appears to be nearing the end of its downward valuation cycle with greater transaction evidence emerging. ]]> Australian and international fixed interest
Bond market returns were largely flat in October as investors tried to come to grips with opposing forces in an apparent improvement in economic activity but continuing low inflation. In Australia the solid growth in the domestic economy has seen the Reserve Bank start to raise rates, however, other central banks are not likely to follow suit until well into 2010 at the earliest. ]]> Investment Market Update

Overall the economic picture was generally mixed in all regions...

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]]> Australian shares
Share markets have all enjoyed the lift in activity and the return of risk seeking investors has driven prices to levels that would have been unthinkable only six months ago. Australian shares rose by a further 6.3% over the month to be up 50% from the low. The best performing sectors included Financials, particularly Banks and Consumer related shares, while Energy, Telecommunications and Materials underperformed. ]]> International shares
Global shares moved higher in local currencies; however unhedged exposure posted a moderate loss as the Australian dollar again moved higher. Developed markets of Europe and the USA were largely flat, while the UK bucked the trend posting a positive 4.8% rise. Emerging Markets in Latin America and Asia ex-Japan enjoyed positive returns. Consumer and Media shares were the pick of the sectors, while Materials, Healthcare and Utilities all had negative returns for the month. ]]> Property
Domestically Listed Property Trusts rose by a further 10 per cent in September as investors continued to warm to the sector, following the balance sheets recapitalisation of many LPTs. Unlisted property valuations are still under downwards pressure, but there is some feeling that prices may begin to stabilise over coming quarters. ]]> Australian and international fixed interest
Bond markets were volatile with yields trading in a wide range over the month, but returns were solid with Australian bonds outperforming cash. Credit (non-government bond) spreads continued to contract which also added value.]]> Investment Market Update

The month of September saw further evidence that the world economy has at least stabilised, if not showing signs of growth...

Read the full version of this article by downloading the PDF version.]]> September 2009 Read more /microsite/marketwatch/download/Monthly_September2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp August 2009 - Share markets continue their upward trend
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]]> Australian shares
The improved economic outlook has benefited share markets with the Australian share market returning 6.6% for the month. The reporting season to date has matched or exceeded expectations, which has again aided sentiment. The Financials sector led the market higher as the risk of large scale defaults by bank clients subsided. The market again witnessed continued capital raisings, which strengthened balance sheets. ]]> International shares
Global shares were more subdued rising by only 3.9% on a hedged basis over the month with the UK, Spain and France leading the way. US shares performed well, led again by Financials, Retailers and Building shares. The Australian dollar rallied further in August due to stronger commodity prices and higher interest rates. Emerging markets did not have a happy month, down 1.7%, with the China Index falling by 7%, though this follows a significant rally in Asian markets, particularly China and India. ]]> Property
Listed Property Trusts rose by 16% in August as investors took heart from the rights issues and repayment of debt which has improved the health of many entities in this sector. Unlisted property continued to run on the spot with valuations still under downwards pressure. ]]> Australian and international fixed interest
Bond market returns were solid with Australian bonds outperforming cash as yields fell slightly and credit spreads continued to contract, while hedged overseas bonds were also positive. Real yields on Australian Inflation Linked Bonds had been approaching more attractive levels, though the sector rallied during the month, reducing real yields to around 3% for the Australian 2020 maturities.]]> When will world financial markets recover?

Financial markets continued the upward trend in August with equities and the Australian dollar again moving higher...

Read the full version of this article by downloading the PDF version.]]> August 2009 Read more /microsite/marketwatch/download/Monthly_August2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp July 2009 - Equity markets continue to roar ahead
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]]> Australian shares
The Australian share market has been characterised in recent months by record levels of capital raisings across a range of sectors with all of the major banks raising equity, while many of the listed property trusts have also made attractive issues as a means of recapitalising their balance sheets. The best performing sectors included Financials, Media stocks – largely newspapers, and Retail stocks, while Healthcare Utilities and Telcos underperformed.]]> International shares
Global shares in all regions enjoyed solid rallies, with the best performance in Europe coming from Germany and France, while Asian markets such as Hong Kong, Korea and Singapore all recovered further. In the USA the S&P 500 continues to perform well and is now 41% off the bottom seen in March – the fastest rally since 1938. Although these are good returns hedged shares performed even better, as the Australian dollar continued to rise to a recent peak of over US$0.84. This rise has been driven by better economic growth, rising commodity prices and relatively high interest rates.]]> Property
Listed Property Trusts underperformed the broader share market in July, rising by 2.4%, while in unlisted property some early indications of returns showed little new in the way of revaluations. ]]> Australian and international fixed interest
The bond markets were mixed with Australian bond returns in line with cash, while hedged overseas bonds were more positive with falling yields reflected in a better performance from government bonds and non-government bonds.

Despite the strong run-up in share markets it is impossible to say that there is no further negative news ahead, as economic growth remains weak, the US consumer is still cautious and unemployment continues to rise, albeit at a slower pace than seen earlier in the year. Shares are no longer cheap and at best are fair value, and much will depend on the earnings results from the corporate sector over the balance of 2009 to give an indication of the outlook from here on in.]]> Equity markets continue to roar ahead

The new financial year has started strongly. Further evidence of the ‘green shoots’ economic recovery and a resurgence of risk appetite...

Read the full version of this article by downloading the PDF version.]]> July 2009 Read more /microsite/marketwatch/download/Monthly_July2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp June 2009 - Mixed fortunes in June
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]]> Australian shares
Following on from the sharp three month rally in local share markets, recent weeks are showing signs of fatigue with the solid positive returns (4.0%) for June coming largely in the first half of the month and despite a record amount of capital raisings. Sectors that performed well included Financials and Telcos, while Resources were flat as commodity price rises came to a halt. Smaller companies again underperformed the broader market.]]> International shares
Global share markets were little changed over the month with falls in the Energy and Materials sectors partially offset by the better performance of Consumer and Healthcare related shares. European share markets underperformed, led down by the big markets of Germany, France and the UK, but the Japanese share market showed some resilience at last. Emerging Market country returns were widely divergent, ranging from a 25% positive return for Argentina, to a negative 13% return for Russia. Global share markets were again disturbed by currency fluctuations, with higher commodity prices and relatively high interest rates leading to further strength in the $A and again detracting from returns to unhedged Australian investors.]]> Property
Listed Property Trusts again outperformed the broader share market in June, but longer term returns are still well behind. There has been a resurgence of interest in this sector as share prices remain depressed. Unlisted Property Trusts are still expected to show weakness for the balance of the year and June returns are likely to be weaker as property valuations are revised downwards.]]> Australian and international fixed interest
The bond markets have remained weak with a further rise in Government bond yields which have been reacting to signs of economic recovery. Australian Government bonds had a negative return for the month but global Government bonds fared better as yields fell from the highs of May. Non-government bonds continued to outperform, as their spreads relative to Government bonds contracted further and as liquidity in these markets improved.]]> Mixed fortunes in June

The month of June was characterised by polarised economic signals, some indicators pointed to weaker levels of activity, while others indicated ‘green shoots’ were taking hold...

Read the full version of this article by downloading the PDF version.]]> June 2009 Read more /microsite/marketwatch/download/Monthly_June2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp May 2009 - Share markets enjoy a much needed rally
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]]> Australian shares
World share markets continued to recover sharply in April, with both global and Australian shares returning over five per cent for the month. In Australia, this is the first time the index has posted consecutive monthly gains since the March/April period of last year. The Resources sector lagged, despite news that the worst of the economic decline may have now passed. The Consumer Durables, Consumer Staples and Diversified Financials sectors all outperformed the broader market. In the Banking sector, rising bad debts impacted profits, leading to weak earnings reports from both the NAB and ANZ. Small cap shares outperformed large cap shares again.

The rally in shares has seen share prices rise at unprecedented rates and some commentators are of the view that the rise has been overdone, at least in the short term. The recovery has already moved faster and further than anyone expected. Although the rate decline in the growth of the world economy is showing signs of slowing, there are few signs of a solid recovery. Until there is more certainty about the direction of growth, it is sensible to be circumspect about the longevity of the share market strength.]]> International shares
Global share markets continued to forge ahead in local currency terms. The US S&P500 Index rose by 9.4 per cent while some European markets such as Germany and France performed even better, rising 17.4 per cent and 13.6 per cent respectively. Emerging market shares were even stronger, with Asian markets outperforming strongly. Sentiment was helped by the Chinese stimulus package which seems to be filtering through to other economies in the region. Conversely, Latin America has been largely underperforming.]]> Property
Listed Property Trusts rallied in April, outperforming ordinary shares. Their returns are well above the negative returns seen across unlisted property trusts as the underlying values of the properties are gradually being re-valued downwards.]]> Australian and international fixed interest
In the bond markets, Government bonds have had a sharp sell-off, as rates have risen from the lows of a few weeks ago. The World Government Bond Index returned -5.4 per cent over the month on an unhedged basis. However, both the UBS Composite and the Barclays Global Aggregate Indices were supported by improved returns from the non-Government bond sectors and have shown net returns close to zero. There has been a sharp recovery in the prices of some high yield corporate bonds in recent weeks, as buyers have returned to take advantage of the higher yields on offer compared to the minimal returns available on cash and bank bills.]]> When will world financial markets recover?

This is a question that everyone wants answered and one that is hotly debated by professional investors...

Read the full version of this article by downloading the PDF version.]]> May 2009 Read more /microsite/marketwatch/download/Monthly_May2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp April 2009 - Equity market still weak but credit stabilises
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]]> Australian shares
Sharemarkets around the world have enjoyed a good rally in March as some investor confidence returned. Australian shares have risen by 8.1 per cent, with small companies being the outperformers. The sectors that performed most strongly included the beaten down financials, information technology and consumer staples, while the consumer discretionary and healthcare sectors underperformed. The banks have all risen strongly with the underlying businesses performing well with improved margins. The recent period has been characterised by a surge in equity raisings with $32bn raised in the past six months to help recapitalise companies.

The rally in shares has continued into early April, but economic conditions remain weak. It’s also too soon to state whether the bear market is over. It’s likely that in the months ahead there will be further volatility and while there will be opportunities to buy cheap assets, caution remains the watchword.]]> International shares
Global sharemarkets were also stronger in local currency terms and the MSCI ex Australia index rose by 6.5 per cent in March. Unfortunately this was offset by a stronger $A which rallied 8.8 per cent against the USD, on the back of renewed risk appetite and some recovery in commodity prices with the final result to unhedged global share investors being a small negative return for the month. The most defensive sectors such as utilities and consumer staples underperformed while financials recovered somewhat after the battering they have taken in recent quarters.

Shares in the US and Canada both rose by 8.5 per cent, while European markets were also stronger although they lagged the US. Emerging markets outperformed developed markets over the month with commodity exporters such as Russia (oil and gas) and South Africa (gold and base metals) leading the pack. Asian markets were also dragged higher on the back of a strong performance by China, which was boosted by a package of infrastructure spending.]]> Property
Listed Property Trusts were flat in March and again underperformed shares. Although the banks are becoming a little more supportive to some entities there continues to be uncertainty on others which are less likely to survive. Unlisted property returns are expected to also suffer downwards revaluations in 2009 under pressure from the sales of buildings required to meet redemptions and the potential impact of the economic downturn on tenant demand.]]> Australian and international fixed interest
Bond market yields have been very volatile in recent weeks, but there was not much change over the month. Index returns showed a small positive return with global bonds outperforming Australian bonds as US Treasury and other Government bonds yields fell in yield, compared to the more static Australian bond market where yields have been held up by the still higher cash rates.]]> Investing in uncertain times

The impacts of the Global Financial Crisis (GFC) have been hard felt by many...

Read the full version of this article by downloading the PDF version.]]> April 2009 Read more /microsite/marketwatch/download/Monthly_April2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp March 2009 - Equity market still weak but credit stabilises
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]]> Australian shares
The profit reporting season, the global economic slowdown and further concerns in the international banking system saw the Australian share market fall further in February. The All Ordinaries Index fell 5.2 per cent to be down 41.9 per cent over the 12 months to 27 February 2009. Growing concerns over Government takeover of some large US banks caused unease in markets. Consumer Staples (-0.1 per cent) and Energy (+2.7 per cent) were the better performing sectors in a tough market. The Industrial sector (-21.2 per cent) was the worst performer, due to some poor profit results and concerns about the outlook for future profits in a tough economic environment. The recent profit reporting season was mixed, with some companies meeting expectations, while others disappointed.]]> International shares
The major global equity markets fell over February, with reignited concerns over major US banks and continued weak economic data. The MSCI World Index fell 10.5 per cent in $US terms and was down 11.8 per cent in $A terms. Over 12 months, global shares are down 48.4 per cent in $US terms and have fallen 25.1 per cent in $A terms. Emerging markets were predominantly weaker, with the MSCI Emerging Markets Index falling 7.1 per cent. Concerns heightened over the large debt levels and possible defaults in several emerging European economies. The worst performers were the Czech Republic (-17.2 per cent), Poland (-12.1 per cent) and Hungary (-11.5 per cent).]]> Property
Listed Property Trusts fell a further 16 per cent in February as companies struggled from re-financing difficulties and, in some cases, from very large write downs.]]> Australian and international fixed interest
Central Banks have continued to cut cash rates in an effort to support economic activity and Government bond yields remain at close to historical low levels. Despite this, the spreads on non-Government bonds were all weaker in the latter half of February as the economic data rapidly worsened and the creditworthiness of these bonds was considered to be lower. Overall, the bond indices in local currencies were weaker as yields rose.

The outlook for the world’s economic system has continued to deteriorate in recent months and there is, as yet, little sign that the stimulus from lower cash rates and fiscal spending has had any benefit. Expectations are for continued weakness for most of 2009, but the prices of many assets have now discounted much of this weakness. Financial markets typically recover before economic activity picks up. However, the timing of this is always in question, and investors are likely to await some signs of stability before starting to put significant sums to work.]]> When looking at super fund performance - are you comparing apples with apples?

If you have money invested in superannuation, chances are you have experienced nothing like the kind of financial conditions we have seen over the past twelve months...

Read the full version of this article by downloading the PDF version.]]> 24 February 2009 Read more /microsite/marketwatch/download/Monthly_March2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp February 2009 - Equity market still weak but credit stabilises
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]]> Australian shares
Australian shares started with a rise in prices in the first week of January but by month end had lost 4.9 per cent. Slowing Chinese growth, weaker domestic data and a string of profit warnings harmed sentiment. Healthcare stocks performed strongly as the flight to safety continued and Financials were helped from an additional two month extension to the shorting ban as well as the news of another bailout of banks by the US Government.

While Rudd’s stimulus package helped some retailers, department stores are struggling and some discounters have collapsed. Building related shares were heavily hit as house prices fell and housing starts declined. Small company shares were dominated by resources stocks which performed well as commodity prices showed some recovery. The market has been adversely affected by the constant stream of rights issues at discounted prices by a wide range of companies.]]> International shares
International shares in Australian dollar terms rose marginally over the month as the Australian dollar fell again against most currencies, but hedged investors had a decline of 7.4 per cent. January was marked by a sharp decline in Chinese growth (to 6.8 per cent in the fourth quarter), a record low in US confidence, a raft of profit warnings and the largest loss of jobs since WWII. In the US, the Fed’s decision to take more toxic debt off the hands of banks provided some support for the financial stocks late in the month.]]> Property
Listed Property Trusts fell a further 9.7 per cent in January to be 52 per cent lower over the 12 months. Unlisted property returns are expected to continue to show higher cap rates and falling valuations in months ahead.]]> Australian and international fixed interest
The bond markets around the world were mixed, with the Australian UBS Composite Bond Index rising by 1.4 per cent on the back of stronger government bond yields which benefited from a flight to safety, but partly diluted by non-government bonds which did not perform as strongly. Unhedged global bonds were strong, but again the hedged indices showed a negative return as the Australian dollar fell against most currencies. The credit markets finally showed some signs of stability in January and although they underperformed Government bonds, they did have positive returns.]]> Equity market still weak but credit stabilises

The world economy continued to deteriorate in January, as economic data showed unemployment rising and manufacturing in every country falling at unprecedented rates...

Read the full version of this article by downloading the PDF version.]]> 24 February 2009 Read more /microsite/marketwatch/download/Monthly_February2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp January 2009- The financial crisis hits all corners of the globe
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]]> Australian shares
The volatility seen in recent months continued in the last month of the 2008 calendar year, however some recovery in prices late in the month saw a much more stable outcome. The financial markets continued to be affected by bad economic news, with no country seeming immune from the slump in activity. Australian shares changed little in December, with weak returns of the industrials sector offset by some recovery in resource shares. Banks continued to flounder as credit markets have remained weak and defaults gather pace but consumer related stocks performed well.]]> International shares
Economic indicators show that most regions of the world are flirting with a recession, and even the Chinese economy has slowed sharply from the 11-12 per cent growth rates of recent years. Global shares enjoyed a positive month with both developed markets and emerging markets gaining ground. Unfortunately for unhedged Australian investors the AUD rallied on the back of USD weakness and this converted the positive local currency returns to a negative when converted to AUD. Germany, Japan and the UK markets contributed to the rally but most of the smaller markets were negative.]]> Property
Property markets continued to be weak with listed property falling by 10.5 per cent as companies struggled to refinance debt. Unlisted property returns will also be weaker than seen for some years as capitalisation rates rise.]]> Australian and international fixed interest
The monetary and fiscal authorities around the world have been using every trick to avoid a melt-down in the world financial markets, including cutting cash rates to close to zero and injecting huge amounts of liquidity into the banking system. These actions so far have yielded little fruit, but there is no doubt that we will see more financial initiatives in 2009. Hopefully these will gain traction later in the year, but there seems little chance of any economic recovery in the first quarter. ]]> The financial crisis hits all corners of the globe

Economically speaking, there has been little to celebrate for the first month of 2009 with news from around the globe failing to improve...

Read the full version of this article by downloading the PDF version.]]> 20 January 2009 Read more /microsite/marketwatch/download/Monthly_January2009.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp November 2008 - Markets continue to cause havoc
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]]> Australian shares
TThe Australian share market lost 6.3 per cent in November, as measured by the S&P / ASX 300 Accumulation Index. It also hit its lowest level since early 2004 on 20 November, as the devastating slide in global equity markets continued. Domestically, the economic environment continued to deteriorate during the month. House prices declined and manufacturing and business confidence indicators fell; however, employment growth remained relatively steady. All sectors were in the red with the exception of Real Estate ex Property Trusts (+3.2 per cent), Media (-19.5 per cent), Capital Goods (-15.6 per cent), Retailing (-13.6 per cent) and Banks (-12.7 per cent) led the fall. Resources outperformed on a relative basis, recording a decline of 1.9 per cent. This came despite BHP Billiton abandoning its ambitious takeover of mining rival Rio Tinto, blaming increased risks from the collapse in commodity prices and the turmoil in global financial markets.]]> International shares
International shares Global equity markets continued to lose ground in November, declining 5.8 per cent as measured by the MSCI World ex Australia Index (Hedged). On an unhedged basis, the MSCI World ex Australia Index fell 5.2 per cent, boosted by a slight weakening in the Australian dollar. Weaker economic data continued to reveal the depth of the recession and keep investors concerned. World oil prices fell below US$50 a barrel, based on growing fears a worldwide recession could ravage energy demand. Governments globally announced a range of fiscal stimulus packages, while central banks continued to aggressively reduce interest rates. The US Government rescued Citigroup, the second largest US Bank, from collapse. Apart from Sweden (+0.1 per cent), all countries recorded declines in local currency terms. Ireland (-17.8 per cent), Austria (-14.6 per cent) and Norway (-11.7 per cent) were the greatest detractors, while the US lost 7.4 per cent, Japan declined 4.4 per cent and the UK fell 1.5 per cent.]]> Property
Property The property securities sector outperformed the broader market, declining a modest 0.1 per cent in November, as measured by the S&P / ASX 300 A-REIT Index. Volatility remained a significant feature of the property securities sector this month. Stocks that outperformed included those that have recently recapitalised, including Mirvac Group (+42.7 per cent) and GPT Group (+26.2 per cent). Stocks that lagged were typically the smaller capitalised stocks that were marked back on earnings, capital and distribution risks. These included Valad Property Group (-34.5 per cent), Tishman Speyer (-28.1 per cent) and Centro Retail (-19.1 per cent). Sector heavyweight Westfield Group (-8.7 per cent) also underperformed after announcing that it would underwrite 50 per cent of its distribution for the next twelve months.]]> Australian and international fixed interest
The Reserve Bank of Australia (RBA) Board announced the cash rate would be cut by a further 0.75 per cent to 5.25 per cent in November. Cash returned 0.5 during the month according to the UBSA 90 day Bank Bill Index, and posted a solid 7.8 per cent return for the year. Australian fixed interest, as measured by the UBSA Composite Bond All Maturity Index, returned a sizeable 2.9 per cent over the month as a result of rising domestic bond prices. An annual return of 13.3 per cent was achieved. International fixed interest rose 3.1 per cent in November, according to the Barclays Global Aggregate Index (Hedged). Over the 12 month period, a modest gain of 6.9 per cent was achieved.]]> Markets continue to cause havoc

The past month has left many investors feeling bruised and battered. The seemingly relentless decline which has seen the Australian share market halve from its levels in 2007, has also made significant inroads into many peoples’ retirement savings.

Recent weeks have been especially difficult. On 20 November, the previous 11 trading days saw almost 1,000 points written off the ASX 200 Index. This represents a 23 per cent fall.

Factors which have contributed to this decline on the Australian share market have been a weakening domestic economic outlook and uncertainty surrounding efforts to stabilise global banking systems. An about turn that occurred in the past month was the US Government’s announcement that it would no longer acquire distressed mortgage-backed assets as was initially intended under its $US700 billion Troubled Assets Relief Program (TARP). The decision to amend the TARP was due to difficulties in determining a true value for Mortgage Backed Securities (MBS) assets. It will instead utilise this money to acquire direct equity stakes in troubled financial institutions.

Companies which have suffered the most have been those that carry relatively high levels of debt. This has tended to include listed property trusts and listed infrastructure. Many of these companies have had to rely on shareholders for capital as they have been unable to sell assets at an appropriate price in order to reduce debt. This process of paying down debt is referred to as ‘de-leveraging’. Companies are no different to many individuals in the sense that just as individuals are generally content to ‘gear up’ when times are good, they are often just as averse to carrying leverage when times are bad – particularly when there is a perception, among some, that things are just going to keep getting worse.

It would also come as no surprise to you that many margin loan providers have been making record numbers of margin calls over October and November. These have added yet more downward selling pressure to an already battered market.

In an illustration of just how much bad news is priced into markets, Macquarie Bank unveiled a profit for the half year which was 43 per cent below the corresponding period a year earlier. Instead of the announcement being met by a significant sell down, as many had anticipated, the stock rallied sharply. The message that could be taken from this is that while the news was bad, it simply wasn’t as bad as markets had expected.

As a further example of the divergence in views, the Reserve Bank Australia (RBA) expects Australia’s GDP to grow somewhere in the region of 1.5 per cent for the 2008 calendar year. This contrasts with valuations on the share market which appear to be pricing in a severe recession. These conflicting messages make it difficult to determine what direction markets and investors may take.

However, it is likely that it will take some time for positive sentiment to return to the market. But this doesn’t necessarily mean that you should depart from your long term investment strategy.

Switching your assets to a defensive position may be tempting during these uncertain times, but it is important to recognise that any changes you make now may have an impact on your investment returns when markets recover. It is also difficult for anybody to time their re-entry into the market. This is the time to stay informed and make sure you have access to good financial advice.]]> 9 February 2008 Read more /microsite/marketwatch/download/Monthly_November2008.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp October 2008 - Financial Markets Tumble
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]]> Australian shares
The Australian share market fell 12.9 per cent in October, as measured by the S&P / ASX 300 Accumulation Index. As a result the financial year to date figure has declined -22.2 per cent. Declining economic indicators including consumer and business confidence, credit growth and employment advertising have seen the risk of a recession increase. Consequently, the Rudd Government revealed a $10.4 billion economic stimulus package as well as guaranteeing bank deposits in Australian banks. Almost all sectors were negative this month; the largest declines were experienced by Property Trusts (-25.4 per cent), Retailing (-24.7 per cent), Energy (-19.3 per cent), Media (-19.0 per cent) and Materials (-17.9 per cent). Telecommunications (-2.5 per cent), Pharmaceuticals (-3.3 per cent) and Banks (-4.4 per cent) all relatively outperformed the broader market.]]> International shares
Conditions continued to deteriorate in international financial markets during October, with global equities experiencing the most extreme volatility in decades. Stock exchanges around the world including the Dow Jones Industrial Average experienced double digit swings on a daily basis. Global shares saw a decline of 19.0 per cent as measured by the MSCI World ex Australia Index (Hedged). On an unhedged basis, the MSCI World ex Australia Index fell 2.9 per cent, enhanced by a significant weakening in the Australia dollar. All countries posted declines in local currency terms. Austria (-30.3 per cent), Greece (-29.9 per cent) and Belgium (-29.7 per cent) led the way down while Switzerland (-8.6 per cent), Finland (-8.8 per cent) and New Zealand (-10.9 per cent) outperformed on a relative basis. The countries that make up the largest part of the index, the US, UK and Japan, declined 17.1 per cent, 10.6 per cent and 21.1 per cent respectively.]]> Property
The property securities sector plummeted in October, recording a decline of 25.4 per cent as measured by the S&P / ASX 300 A-REIT Index. The entire sector was in the red with the exception of Mirvac Industrial which gained 5.6 per cent. Valad Property Group continued its downward spiral and lost a further 71.5 per cent, while the ING Industrial Fund fell a massive 78.4 per cent. The Macquarie Countrywide and Macquarie DDR Trust both suffered significant losses, down 75.3 per cent and 70.0 per cent respectively. Centro Properties (-13.6 per cent) and Centro Retail Group (-4.3 per cent) had relatively better months compared with the recent past and managed to outperform the broader market. The heavyweight Westfield Group outperformed on a relative basis, declining 1.4 per cent.]]> Australian and international fixed interest
In an aggressive move, the Reserve Bank of Australia (RBA) Board announced the cash rate would be cut by 1.0 per cent to 6.0 per cent in October. According to the UBSA 90 day Bank Bill Index, cash returned 0.7 per cent during the month and a substantial 7.8 per cent for the year. Australian fixed interest returned a solid 2.0 per cent over the month. As bond prices are inversely related to yield, the decline in rates resulted in rising domestic bond prices and these were positively reflected in the annual return of 11.0 per cent. International fixed interest declined 0.8 per cent in October, according to the Lehman Global Aggregate Index (Hedged). Over the 12 month period, a modest gain of 5.1 per cent was achieved.]]> The financial situation a year on

This is a good time to focus on educating yourself about your investments. Importantly, this is not a time to panic.

We are now coming up to one year since the present financial crisis first became apparent. The severity of the crisis was underestimated by most analysts and financial experts. What was first believed to be a problem largely contained to the United States (and primarily in sub-prime lending) has had far reaching implications at a global level.

The root of the financial challenges we are now witnessing was the widespread decline of US house prices. This highlighted weaknesses in some US financial practices but has now had a much broader, knock-on effect.

In recent months, the world banking system has come under immense strain and multiple bailouts and nationalisations of banking interests have been required. Confidence in the global financial system has been damaged despite the efforts of governments and central banks around the world to instil some measure of liquidity and confidence back into the market.

Equity markets around the globe have been savaged in the order of 40 per cent from their peaks approximately one year ago. The current financial crisis is now being described by many commentators as the worst since the 1930s Great Depression.

Australia has not been immune from the widespread sell-off in financial markets. Commodity prices have declined sharply due to fears that a global recession and slowdown in China’s growth will reduce demand for resources. Closer to home, there are fears that house prices in Australia may experience significant declines – some commentators forecasting falls of up to 40 per cent.

With the levels of uncertainty prevailing at the moment, it is easy for more rational responses to be overridden. The situation is grim, but there are some things that should be kept in mind to maintain a balanced perspective on events:

1. Australia is widely acknowledged to have one of the world’s most robust banking systems. This is important to ensure the smooth running of the economy. So far, Australia’s banks have weathered events far better than most others around the globe.
2.Financial markets are currently engaged in a shake-out of the excesses that have built up over the past decade or more. Eradicating many of these bad debts and poor business practices is a painful process, but healthy in the long term.
3. In this kind of environment, share prices are not necessarily an accurate reflection of the ‘intrinsic’ or fundamental worth of a company. Sentiment has taken a battering and this can cause emotion to overrun fundamentals.
4. In contrast to the recessions anticipated for many developed nations, NAB Capital is currently forecasting positive Gross Domestic Product (GDP) growth of around 1.3 per cent for Australia.
5. The current level of the Australian share market indicates that it is already factoring in recessionary-like company earnings.
6. The level of interest rates within Australia are currently at a relatively high six per cent when compared to other countries. This provides the Reserve Bank of Australia (RBA) with flexibility to reduce rates as needed in a bid to stimulate the economy. To put this in perspective, this compares to UK at 4.5 per cent, European Central Bank (ECB) at 3.75 per cent, US at 1.5 per cent, Japan at 0.5 per cent and Canada at 2.5 per cent.
7. Even after a raft of initiatives announced recently, the Federal Government still has a forecast budget surplus of around $7 billion which it can use to stimulate economic growth if required. The Federal Government is also carrying very little debt (only $60 billion or around 5% of GDP). This compares to 66% in the US, 44% in the UK and 166% in Japan.
8. The fall in the Australian dollar should be a net positive to the domestic economy as it stimulates our export sector.
9. Financial market declines do eventually come to an end, even when it feels like they won't.

The Australian Government has not been sitting idle during this period of financial market instability. It is fast-tracking a fiscal stimulus package totalling more than $10 billion targeted mainly at pensioners, families and first-home buyers – much of which will be delivered before December of this year.

In addition to this, the Australian Government has taken unprecedented steps to shore up confidence in Australia's financial system. These measures include:

1. Guarantee of deposits – The Government has guaranteed a full 100% of the deposits in Australian-owned banks, locally incorporated subsidiaries of foreign banks, credit unions and building societies. There is no dollar amount cap and the guarantee will run for three years.
The practical implication of this is that it virtually eliminates the likelihood of a ‘run on a bank’.
2. Offer to guarantee wholesale funding – The Government will offer a guarantee on debt securities issued by Australian-owned banks, locally incorporated subsidiaries of foreign banks, credit unions and building societies. This guarantee applies to new and existing issuances of debt securities and will continue for a term of up to 60 months. A fee will be charged for the guarantee.

The practical implication of this is that it improves banks’ ability to access longer-term funding from the market as it gives investors/lenders confidence that they will have their investment repaid in full.
3. Additional Residential Mortgage Backed Securities (RMBS) purchases - The Australian Office of Financial Management has been directed to purchase another $4bn of RMBS from non-bank lenders. This is in addition to the $4bn announced several weeks ago.

The purpose of this is to promote competition in the home-lending arena by kick-starting the stalled RMBS market which has historically been an important funding source for non-banks.

Most developed countries have adopted similar measures to those above. The only major measure which the Australian government has deemed unnecessary for the Australian economy at this stage is the purchase of direct equity stakes in banks. A large component of the European, UK and US response includes government funded recapitalisation of banks which will in many cases, see governments emerge as major shareholders. Currently the government has indicated that there is no need for a recapitalisation of the Australian banking system.

Recent events have shocked investors and the unrelenting pace of the decline in equity markets has caused both disbelief and consternation. While it may be hard to see past the current pall that has been cast over investment markets, there have been a range of measures taken to help stabilise markets. Concerted global government and central bank action has reduced the prospect of a collapse in the financial and banking systems.

Given the degree of stress markets have undergone, it is highly likely investment returns will continue to be volatile. During these inevitable spikes and falls in the market, it is more important than ever to focus upon your investment strategy. Superannuation for most is a long term investment and you should continue to think long term.

We strongly recommend you seek advice from a licensed financial planner and carefully consider your current financial situation and objectives before making any financial decisions.]]> 1 November 2008 Read more /microsite/marketwatch/download/Monthly_October2008.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp September 2008 - Financial markets in turmoil
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]]> Australian shares
The Australian share market plummeted 9.9 per cent in September, as measured by the S&P / ASX 300 Accumulation Index. Poor sentiment from overseas markets contributed to the decline. Most sectors were in the red, with Materials (-22.5 per cent), Capital Goods (-17.9 per cent), Diversified Financials (-14.5 per cent) and Energy (-13.0 per cent) experiencing the largest declines. Retailing (-9.0 per cent), Food & Staples Retailing (-4.4 per cent), Consumer Services (-3.0 per cent) and Banks (-0.6 per cent) also suffered. Only three sectors recorded gains for the month; Consumer Durables & Apparel (+5.9 per cent), Insurance (+1.3 per cent) and Automobiles & Components (+0.2 per cent).]]> International shares
Conditions in international financial markets deteriorated in September, with global equities recording a decline of 11.3 per cent as measured by the MSCI World ex Australia Index (Hedged). On an unhedged basis, the MSCI World ex Australia Index fell 3.6 per cent, enhanced by a significant weakening in the Australia dollar (which fell 7.4 per cent against the US dollar). All countries posted declines in local currency terms. Austria (-27.7 per cent), Norway (-23.8 per cent), Ireland (-22.5 per cent) and Belgium (-21.8 per cent) led the way down while Switzerland (-8.3 per cent), New Zealand (-8.2 per cent), Spain (-5.7 per cent) and Portugal (-4.7 per cent) outperformed on a relative basis. The heavyweights Japan, UK and the US declined 13.1 per cent, 12.9 per cent and 9.2 per cent respectively.]]> Property
The property securities sector outperformed the broader domestic market in September, recording a decline of 5.9 per cent, as measured by the S&P / ASX 300 A-REIT Index. Centro Retail Group (-53.1 per cent) and Centro Properties (-49.7 per cent) continued their downward spiral. Other significant detractors included Valad Property Group (-43.3 per cent), Mirvac Industrial (-37.9 per cent) and B&B Japan Property (-28.7 per cent). Westfield Group which makes up a significant proportion of the Index outperformed on a relative basis, declining 3.8 per cent. Positive performances were seen by CFS Retail Property (+4.2 per cent), Commonwealth Property (+3.2 per cent), GPT Group (+2.9 per cent) and Stockland (+2.5 per cent). ]]> Australian and international fixed interest
The Reserve Bank of Australia (RBA) Board announced the cash rate would be cut by 0.25 per cent to 7.00 per cent in September. According to the UBSA 90 day Bank Bill Index, cash returned 0.6 per cent during the month. Australian fixed interest returned a strong 1.3 per cent over the month and a healthy 8.4 per cent over the year, as measured by the UBS Australian Composite Bond Index. International fixed interest provided a positive monthly return of 0.6 per cent, according to the Lehman Global Treasury Index (Hedged). In contrast, as measured by the Lehman Global Aggregate Index (Hedged) a decline of 0.7 per cent was experienced. This highlights the current market volatility and reflects the premium being placed on quality assets. ]]> Some resilience remains despite volatility
The Australian share market has experienced significant volatility over the past twelve months. Despite this, it has at times shown some signs of resilience and so far resisted moving below the All Ordinaries 4800 level. More recently, the market experienced its largest one-day rise of 3.9 per cent in almost six months, achieved on 8 September.

This increase came in response to a move by the US Federal Reserve to take control of capital-constrained mortgage lenders Fannie Mae and Freddie Mac. Concerns that these two agencies - which account for almost half of the US home loan market - would collapse under the weight of the biggest rise in mortgage defaults in three decades prompted the move. While Fannie Mae and Freddie Mac did not underwrite or guarantee sub-prime loans directly, they did acquire portfolios of these loans, which saw them lose tens of billions of dollars value.

Under the plan the two are to be placed into conservatorship or under protection by the Federal Housing Finance Agency. This effectively means that the US tax payer is guaranteeing and backing all of Fannie Mae and Freddie Mac's liabilities. The bail-out actions are designed to support the availability of mortgage finance in the US as well as provide stability to the broader financial markets.

So far this action has had the desired effect with global share markets responding positively. But while the bail-out ends the short-term risk of the situation deteriorating further, the recovery could be short lived if the market realises the rescue cannot resolve the major problems still facing the US housing market in particular, and global share markets in general.

As a result of several increases in the cash rate and tighter credit standards, financial conditions in Australia have become quite tough. Together with other factors including higher fuel costs and reduced asset values, the Reserve Bank of Australia (RBA) has indicated the necessary restraints have been placed on demand. While in the short term inflation is expected to remain relatively high, it is looking more likely that household demand will remain subdued and overall economic growth will slow over the period ahead. This gave the RBA reason to cut rates by 25 basis points to 7.0 per cent in early September, as had been widely anticipated.

The rate cut has contributed to a fall in the Australian dollar to a 12 month low of 81 US cents (at the time of writing). This fall in the Australian dollar, makes it more attractive for companies with offshore earnings or international investments. The other major economic news was the GDP figure which grew by 0.3 per cent over the June quarter, which was below consensus expectations and highlights the weakening of the Australian economy and provides impetus for further rate cuts. The result, while weak, still compared favourably at a global level with 40 per cent of the Organisation for Economic Co-operation and Development (OECD) countries posting negative GDP growth in the second quarter.

RBA governor Glenn Stevens said at a House of Representatives Standing Committee on Economics that while he couldn't rule out a recession completely, he indicated there is no evidence to suggest there would be one.]]> 1 October 2008 Read more /microsite/marketwatch/download/Monthly_September2008.pdf http://www.plum.com.au/microsite/marketwatch/index.asp http://www.plum.com.au/microsite/marketwatch/index.asp August 2008 - Markets bounce back
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]]> Australian shares
The Australian share market bounced back in August, returning 4.0 per cent, as measured by the S&P / ASX 300 Accumulation Index. Earnings results from the current reporting season came in as expected. Unlike the past few months, most of the sectors posted positive returns. Consumer sentiment reflected this positivity as the Retail and Consumer Service sectors returned 17.0 per cent and 8.2 per cent respectively. Property Trusts (+10.0 per cent), the Energy sector (+8.7 per cent) and the Banks (+6.2 per cent) all outperformed the broader Index. Only a handful of sectors posted negative returns including Diversified Financials (-7.9 per cent), Telecommunications (-1.0 per cent) and the heavyweight Materials sector (-0.2 per cent).]]> International shares
Global equities were mostly up for the month of August. On a hedged dollar basis, the MSCI World Index (excluding Australia) returned 1.5 per cent. On an unhedged basis, the MSCI World ex Australia Index returned 7.8 per cent, boosted by a dramatic weakening in the Australian dollar. The Financial Sector was weak globally, but particularly in the US as concerns about Fannie Mae and Freddie Mac's viability continued. Oil prices continued to decline, falling from $124/barrel at the start of the month to $116 by month end. In local currency terms, Ireland (-16.2 per cent), Norway (- 9.5 per cent), Austria (-8.7 per cent) and Hong Kong (-6.7 per cent), were among the significantdetractors. A number of positive returns were experienced in August including the Netherlands (+4.3 per cent), Switzerland (+4.1 per cent) and the United Kingdom (+1.3 per cent). The United States was also up marginally, returning 0.2 per cent.]]> Property
The property securities sector outperformed the broader domestic market in August, returning a very healthy 10.0 per cent, as measured by the S&P / ASX 300 A-REIT Index. Macquarie DDR Trust led the way, returning 40.0 per cent. Mirvac Industrial and Challenger were close behind returning 31.8 and 30.0 per cent respectively. Other notable returns came from the Goodman Group (+24.7 per cent) and Macquarie Countrywide (+17.4 per cent). At the other end of the spectrum negative returns were experienced by Record Realty (-43.1 per cent), Rubicon Europe Trust (-39.1 per cent), Rubicon Japan (-35.6 per cent) and Centro Properties (-35.2 per cent) which continued its downward trend again this month. Westfield Group, which makes up 17 per cent of the Index, returned a solid 10.2 per cent.]]> Australian and international fixed interest
The Reserve Bank of Australia (RBA) Board announced the cash rate would remain unchanged at 7.25 per cent in August. According to the UBSA 90 day Bank Bill Index, cash returned 0.6 per cent during the month. Australian fixed interest returned a healthy 2.1 per cent over the month and a solid 6.9 per cent over the year, as measured by the UBS Australian Composite Bond Index. International fixed interest also provided a strong monthly return of 1.6 per cent, and returned 9.0 per cent for the 12 months to August, according to the Lehman Global Treasury Index (Hedged).]]> A humdrum of activity on the domestic front
Global and domestic equity markets are at similar levels to where they were a month ago. However, in domestic news, there has been a humdrum of activity. We have seen the sharp sell-off in the Australian dollar, a weakening economic outlook for Australia, and the commencement of company reporting season. So what does all this mean?

Sharp sell-off in the Australian dollar
Looking back only four weeks ago, the Australian dollar was trading at almost 98 US cents. Great news for Australian's planning a trip to New York! The prospect of the Australian dollar hitting parity against the US dollar (i.e. matching value dollar for dollar) was spoken of by some analysts as almost a foregone conclusion. Fast forward four weeks and our dollar is now buying only 87 US cents after a dramatic sell-off. The reason for this decline can be attributed to the following reasons.

Change in the direction of interest rates
With a weakening domestic economy the prospect of further official rate rises in the near term has essentially vanished. Instead, a potential fall in interest rates would serve to narrow the interest rate differential between Australia and other countries, thus reducing the carry trade demand for the Australian dollar.

Falling commodity prices
Australia is a large net exporter of commodities such as wheat and wine and the dollar has had a long term relationship with commodity prices. A perceived drop in demand for Australian commodities has led directly to a decrease in the demand for the Australian dollar.

A strengthening US greenback
The fall in the Australian dollar is partly due to a stronger US dollar, which has recovered recently against most world currencies. The reasons for the rally are unclear, as the outlook for US economic growth has not noticeably improved. Moving to the domestic economy, there has been a sharp deterioration in the economic outlook...

Weakening domestic outlook
The Reserve Bank of Australia (RBA) released its eagerly awaited Statement on Monetary Policy on 11 August 2008. This quarterly insight into the RBA's thought processes was of particular interest, with the Statement marking a noticeable shift from last quarter's 'inflation-fighting' stance to a more restrained outlook.

A key comment made in the Statement was that ''recent indications are that a significant moderation in domestic demand is now occurring'' citing lower retail sales and a slight decline in house prices over the June quarter. In short, the RBA now believes that it has accomplished what it originally set out to achieve - a slowing in Australian spending and activity.

This has now set the stage for a sequence of rate cuts over the medium term, with most economists predicting a 0.25 per cent cut to official cash rate to occur from as early as September. Some economists are even predicting a cut of 0.50 per cent due to the speed with which consumer and business sentiment have deteriorated. Having moved into August, company reporting season has now descended upon us...

Company reporting season
The Australian sharemarket has now entered the early stages of company reporting season which covers the financial year just gone, and also typically contains some forward looking statements by management.

Given recent market events, this period in particular represents something of an opportunity for investors and observers to see if the depressed levels that many share prices are trading at, were justified or not.

Being so early in the season, only a small number of companies have reported their earnings. Whilst there have been relatively few surprises in terms of company earnings, accompanying statements by management have given an indication that tougher conditions lie ahead.

Telstra reported a profit of $3.7 billion for the year, slightly below analyst expectations of $3.8 billion, though still up 13.5 per cent on the prior year. Telstra shares closed 4 per cent lower on the day it reported.

Commonwealth Bank's (CBA) profit slightly beat market expectations, announcing a profit increase of seven per cent to $4.8 billion. Despite the good news, CBA closed around one per cent lower on the day it reported, though against a broader market decline of two per cent on the day.

Computershare, the world's largest share registry company reported a 41 per cent increase in earnings per share for the year ending 30 June 2008. While in line with management guidance of around '40 per cent growth' , it fell slightly short of analyst expectations of 44 per cent earnings per share growth. Highlighting the unforgiving nature of the market at the moment, the shares were sold down more than five per cent on the day.

Stockland Group, the first of the major listed Australian property trusts to report, lifted its earnings per share by 5 per cent over the year but indicated that it faces a tough market in the year ahead. Its share price fell six per cent on the day.

As the company reporting season unfolds, the impact of a deteriorating global economic outlook and the effect of the credit crunch on company profit margins will become clear. Going forward, a fall in the Australian dollar against the US dollar and an anticipated cut in interest rates are likely to impact the state of play.

]]> 1 September 2008 Read more /microsite/marketwatch/download/Monthly_August2008.pdf