Quarter 1 of 2012 brought mixed messages in Australia, with two months of strength, followed by a weaker March.
Australian Equities, as measured by the ASX All Ordinaries Index, gained 0.72% in March. The top 200 companies, measured by S&P/ASX 200 market capitalisation Index, gained 0.85% to outperform the market.
Leading these gains was the S&P/ASX 300 Information Technologies industry sector which ended the month 13.5% higher and the Healthcare Sector which ended the month up 7.51% and the quarter up 11.76%.
The Materials sector was the worst performing industry during March, declining by 3.96% due to falling commodities prices. Poorer than expected manufacturing data from China, as well as an announcement by the government to slow down economic growth, triggered a decline in the price of production metals; aluminium, nickel and zinc, in anticipation of reduced demand from the nation. This flowed through to many Australian resources stocks.
The Reserve Bank of Australia (RBA) kept the overnight cash rate steady during March, defying some analysts’ predictions of a further interest rate drop.
This is said to have had some impact on Australian property where confidence remains fragile. The sector experienced a minor correction during March, declining by 0.59%, after posting two solid months of gains, to end the quarter 7.14% higher. Also contributing to the March decline was a decrease in the number of new home loans and housing construction commencements, which are leading property indicators, directing investors to exercise caution in the sector.
On the back of the lack of interest rate cut, and other global liquidity movements the Australian Dollar recorded a decline against the Euro, depreciating by 4.08% last month. The AUD also fell against the British Pound (GBP), finishing the March quarter 4.61% lower. It also fared badly against the US Dollar (USD) and the Japanese Yen (JPY), depreciating by 4.16% in the quarter and 1.83% during March.
The first quarter of 2012 saw optimism returning worldwide to equity markets from the nearing conclusion of the European sovereign debt crisis. While the disaster is not yet entirely averted, as seen in recent days, an important stabilising block was implemented during March, with the EU and IMF providing Greece with a second bailout package. Investors in Europe responded positively to this announcement and drove the MSCI Europe index 3.68% higher, to end a strong quarter during which it appreciated 9.51%.
Asian equity markets did not perform with as much consistency, seeing varied results with the TOPIX (Japan) gaining 2.15%, while the Hang Seng Index (Hong Kong) declined by 5.47%.
Looking ahead we are watching for the following activity this quarter:
- Volatility at lower levels, but continuing as Europe continues to traverse fiscal austerity in many nations.
- Continued improvements in international confidence as the US economy strengthens towards the pre-election period.
- Continued potential for an interest rate cut in Australia in coming months.
Source: Data and statistics drawn from Zenith Monthly Market Report, March 2012
Disclaimer: This article has been written by Prosperity Wealth Advisers Pty Ltd, Corporate Authorised Representative (No 345322) of Primeplan Securities Pty Ltd AFS Licence No 229537 (ABN 59 070 507 274). Suite 16, Level 3, 299 Toorak Road, South Yarra VIC 3141. Tel 03 9826 2800
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