Australian equities continued their strong run over March 2017, spurred on by a solid February reporting season and favourable global conditions. The S&P/ASX 300 increased 3.3%, outperforming international developed markets as the MSCI World ex Aus index gained 1.8% (unhedged AUD). Utilities and Healthcare were the key contributors to Australia’s performance while Materials and Telecom Services detracted. The Reserve Bank of Australia (RBA) maintained its stance on monetary policy, keeping the rate at 1.5%. Housing conditions have caught the RBA in a rut as it attempts to juggle fears of a potential housing bubble against continued support of the economy through lower rates.
AUSTRALIAN EQUITIES
The broad Australian equity market expanded over March, with the S&P/ASX 300 Accumulation Index increasing 3.3% for the month. Returns were positive across the market spectrum, with the best relative performer being the S&P/ASX 50 Accum, increasing 3.7% for the month. The worst performer was the S&P/ASX Small Ordinaries, increasing by 2.7% over the month. The best performing sectors were Utilities (+6.3%) and Healthcare (+5.6%).
The weakest performing sectors were Materials (+0.2%) and Telecom Services (+0.3%). The largest positive contributors to the return of the index were CBA, Westpac and NAB, with absolute returns of 4.4%, 4.5% and 4.5% respectively. In contrast, the most significant detractors from performance were BHP, Telstra and Fortescue Metals with absolute returns of -3.6%, -2.8% and -5.6% respectively.
GLOBAL EQUITIES
The broad MSCI World ex Australia Index was up 1.0% in hedged terms and 1.8% in unhedged terms over the month, as the Australian dollar depreciated against the major currencies over March. The strongest performing sectors were Information Technology (+3.4%) and Consumer Discretionary (+3.3%), while Real Estate (+0.2%) and Financials (+0.8%) were the worst performers. In Australian dollar terms, the Global Small Cap sector increased by 1.6% while Emerging Markets increased 3.3% in unhedged Australian dollar terms.
Over March, the NASDAQ returned 1.5%, the S&P 500 Composite Index rose slightly by 0.1% and the Dow Jones Industrial Average decreased -0.6%, all in US dollar terms. Major European equity markets also experienced positive returns as the FTSE 100 (UK) increased 1.1%, the CAC 40 (France) increased 5.6% and the DAX 30 (Germany) increased 4.0%. In Asia, the Indian BSE 500 was up 3.7% and the Hang Seng Index was up 1.7% while the SSE Composite (China) decreased -0.6% and the Japanese TOPIX also decreased -0.6% over March.
CURRENCY MARKETS
The Australian dollar experienced negative movement over March, depreciating against all the major currencies and finishing with a decreased Trade Weighted Index of 66.2 on 31 March 2017. The Australian dollar depreciated against the US dollar (-0.8%), the Pound Sterling (-0.9%), the Euro (-1.4%) and the Yen (-1.0%). On a trade-weighted basis, the local currency decreased -0.7% over the month.
Source: Mercer
