Investment commentary - 31 March 2011

Provided by Mercer. The information in this article does not necessarily reflect the views of the Trustee.

March was a volatile month for Global Equity markets with the Japanese earthquake and geopolitical unrest in the Middle East and North Africa denting investors' confidence. Global Equity returns were negative whilst Australian Equities finished the month marginally higher. Global and Domestic Bonds posted positive returns.

Significant developments over the month were:


  • Domestic economic data highlights: Q4 GDP grew 0.7% qoq and 2.7% yoy. In March the RBA left official interest rates on hold at 4.75%, describing the current stance as “mildly restrictive.” Retail sales rose +0.5% for the month of February, the best monthly result since July 2010. Annual retail sales remain below trend level.
  • US economic data was mixed. Housing data continued to disappoint, with housing starts (-22.5% month), new home sales (-16.9% month) and existing home sales (-9.6% month) all recording very weak numbers. Employment data continued to show improvement, in March 216,000 jobs were added. The unemployment rate is now 8.8%.
  • The Bank of Japan injected extra funds into the Japanese financial system to limit volatility and to ensure the smooth functioning of markets.
  • The European Financial Stability Fund (EFSF) will be upgraded to €440bn from €250bn.
  • Political tensions in the Middle East lead to a sharp 10.0% gain in the oil price to US$106.72/bbl.

Australian Shares

The month of March was a tale of two halves for Australian Equities. The market fell by nearly 6% in the first half of the month after the earthquake in Japan. However, despite continued uncertainty in the Middle East and North Africa and the fear of nuclear fallout in Japan, the local market rebounded strongly in the second half of the month to post a positive return. The S&P/ASX 300 index returned +0.7% for the month, to finish the quarter +3.1%.

Large cap stocks (+0.8%) outperformed their Mid cap (+0.2%) and Small cap (-0.3%) counterparts for the third month in succession. Unsurprisingly, given the rise in the oil price, Energy (+3.3%) stocks made a strong positive contribution. Conversely, Property Trusts (-2.0%) stocks made the strongest negative contribution.

Strong sector performance saw a number of resource companies dominate the positive contributors list, headed by Woodside Petroleum (+10.2%) and BHP (+1.2%). Wesfarmers (-3.7%) was again the largest negative contributor over the month due to sluggish retail sales.

Overseas Shares

In local currency terms, the MSCI World ex Aus index returned -1.4%. Due to the appreciation of the A$, the return for unhedged Australian investors was eroded to -2.6%. The month of March saw Growth stocks (-2.0%) outperform Value stocks (-2.6%) in A$ terms, based on the S&P Developed ex-Australia Large Medium Cap Value and Growth indices.

In the US, the S&P 500 Composite Index returned 0.0%, the Dow Jones Industrial Index +0.9% and the NASDAQ Composite Index 0.0%, in local currency terms.

In Europe, the FTSE 100 (UK) returned -0.9%, the DAX 30 (Germany) -3.2% and the CAC 40 (France) -3.0% in local currency terms. In Asia, the Chinese Shanghai Composite Index returned +0.8%, Hong Kong's Hang Seng +1.1%, India's BSE 100 Index +9.0% and the TOPIX (Japan) -7.6% again in local currency terms.

Emerging markets returned +4.3% over the month in A$ terms.


Domestic listed property trusts (A-REITs) returned -1.9% for the month. Global Listed Property (FTSE EPRA/NAREIT Global Hedged Index) returned -1.0% during March.

Fixed Interest

The UBS Australia Composite Bond Index returned +0.7% for the month. The Citigroup World Government Bond (ex-Australia) and the Barclays Capital Global Aggregate Bond Index returned +0.2% and +0.5%, over the month respectively.


The A$ appreciated against all currencies (except the Euro) over March. The local currency rose 1.6% against the US Dollar, 2.7% against the Yen, 3.1% against the Pound Sterling and depreciated 1.2% against the Euro. The A$ rose 1.1% on a trade-weighted basis.

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