Cash
The UBSA Bank Bill Index returned 0.5% in September. Official cash rates were left unchanged by the RBA.
Australian Bonds
The Australian fixed interest market retreated in September, down –0.6% as measured by the UBSA Composite Bond Index. A rise in yields across most securities was the reason for the negative return. This was a reversal of fortunes from August when yields fell. The Government sector was the worst performer in September falling
–0.8%. Corporate Bonds did better reflecting the slightly shorter duration and higher yield of this section of the market. The Bank Bill index was the only sector in positive territory. Despite the yield increases over the month, treasury bonds continue to trade at yields below the cash rate.
International Bonds
Global bond markets produced negative returns over the month. Recent economic data, rising energy prices and the extent of Hurricane damage in the US all raised concerns about the outlook for economic growth and inflation. The Lehman Global Aggregate Index (hedged) returned –0.3% for September with all sectors losing ground. The US Federal Reserve increased short-term rates in September by 0.25%, following the same increase in August. The current rate of 3.75% compares with a rate of 1.0% at the start of the tightening cycle. US Treasury bond yields rose for all maturities.
Australian Listed Property Securities
The S&P/ASX 300 All Property Accumulation Index was flat in September. At the sub-sector level, Retail was the weakest performer falling 2.0% send tumbling by a significant decline in market heavyweight Westfield Group. The industrial sector was the strongest performer with diversifieds and commercial also positive contributors.
Australian Shares
The Australian share market rose a stellar 5.1% in September as measured by the S&P ASX 300 All Ordinaries Accumulation Index. Over 12 months the index was up 31.7%. The start of October saw the market retreat as nervousness about the high valuations of the Australian market and overseas jitters saw investors pull back.
Even accounting for the falls, the Australian share market is still performing better than most global share markets. Resource stocks continue to be the driving force rising 10.8% in September. Gold stocks performed particularly well (Lihir Gold +44.4%, Newcrest Mining +23.8%) as the gold price reached a 18-year high, closing at the end of September at $473.5 an ounce.
At the sector level, Basic Materials was the best performer up 11.5% for the month, followed by Energy up 7.7%. Telecommunications was the weakest, down 7.7% for the month. News Corporation was finally removed from the Australian equity indices on 16 September.
International Shares
The MSCI World ex Australia (net dividends reinvested) Index rose 3.2% in local currency terms. This positive result was eroded by a rise in the value of the Australian dollar against all major currencies. The end result was a return of 0.8% in unhedged terms, or 3.4% if fully hedged.
Europe and Asia were the stand out global performers. The UK FTSE 100 gained 3.4%, the German DAX and the French CAC both increased over 4.0%. In Japan, the Nikkei was up a strong 9.4% helped by the return of the Koizumi government, with a larger majority, giving him a mandate for reform. The US markets continued to deliver lackluster returns.
At the sector level, Energy and Materials were the top performers up 6.1% and 7.3% respectively. At the other end of the sector spectrum were Telecommunication Services (0.2%) and Consumer Discretionary (0.9%).
Global Emerging Markets
Emerging markets powered on in September up 7.5% in $A terms (MSCI Emerging Markets Index – dividends reinvested). This was despite rising interest rates in the US and higher oil prices in the wake of supply concerns following the recent hurricanes.
Latin America was the strongest performer in September, up 11.7% in local currency terms. EMEA (Europe, Middle East and South Africa) was the next best region, rising 10.4%. The Asian region was up 6.4% for the month even though a rising oil price is generally a negative for Asian markets as they are oil importers.
All sectors were strongly positive with Energy and Materials the stand outs up 11.5% and 12.1% respectively.
14th-October-2005 |