Investor update
You should always consult your Bridges financial planner before taking action on any recommendation given.
Information current as at 30 June 2010
The ASX200 index lost ground in June (-2.9%) for the second month running and for the first half of the year was down 11.7%. Other stock markets were mixed with the S&P500 index losing 5.4% in June and the Euro Stoxx 50 falling 2.6% while the MSCI APEX 50* (+0.5%) inched higher. Markets struggled for a consistent thematic lead, although concerns over the resilience of global growth did weigh on sentiment. Despite this, the Australian resources sector outperformed the index (-1.2%) as investors looked to a possible softening of the Resources Super Profits Tax. These hopes appeared to be supported by a surprise change of leadership in the Australian Labor Party which ended the reign of Kevin Rudd and gave the country its first female Prime Minister, Julia Gillard. Otherwise, it was the more defensive sectors which tended to do better (consumer staples +0.5%, utilities +0.7%) while the strongest performance came from telecommunications (+9.5%), reflecting a deal struck between Telstra and the Government.
Australian Shares
The ASX200 (-2.9%) sustained a monthly loss for the fourth time this year. Sentiment had to contend with apparent risks to recovery in Europe, mixed signals from the US economy and survey data suggesting that the Australian economy might be losing momentum. The better-performing sectors were mostly defensive ones such as consumer staples (+0.5%) and utilities (+0.7%). Resources fared relatively better but still down (-1.2%): China’s decision to shift its currency policy from a USD peg to a basket of currencies boosted the resources sector, as did hopes that the Government might give ground on the Resources Super Profits Tax. Prime Minister Kevin Rudd stepped down and was replaced by Julia Gillard, a move which appeared to pave the way to such a compromise. Corporate news was largely unsupportive with a number of companies guiding earnings expectations lower (Macquarie Group, IAG, Brambles). The exception was Telstra, whose stock price rose sharply on a non-binding agreement with the company established by the Government to build a National Broadband Network.
Economic news
After six hikes in seven meetings the RBA left its cash rate target unchanged in June. The Board stressed market volatility in Europe and its potential implications for growth as arguing for a pause. Signals from the domestic economy were mixed, with employment recording another strong gain in May while consumer and business confidence surveys recorded falls. US data releases were generally on the soft side of expectations. The People’s Bank of China announced that the renminbi’s peg to the US dollar would be replaced by a target based on a basket of currencies, the approach used prior to 2008.
* The index captures the performance of the 50 largest stocks in the Asia ex Japan region and is optimised for tradability.
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