ANZ Smart Choice Super Investor Update : Member Update Summer 2015
666 Investment insights Elsewhere, euro zone growth remained poor though prospects for 2015 appear better on the back of increased consumer and investor confidence after the European Central Bank (ECB) announced it would do more to support growth by buying government bonds. Bank lending standards have also started to ease now that bank stress tests have concluded reasonably favorably. However, the threat of deflation remains, with headline inflation likely to turn negative early in 2015 given the drop in oil prices. Asia remained patchy with mixed signals from export and production data. China’s growth continued to slow as it transitions towards an economy more focused on domestic consumption. India by contrast, has been the shining star in Asia as Narendra Modi’s earlier election win continued to add positive momentum. Australian growth disappointed in the September quarter despite strong export growth. Activity was held back by falling commodity prices which constrained nominal incomes and with it private demand, driving unemployment to its highest level in 12 years. Signs remain that the transition away from mining dominated growth is happening, though falling consumer and business confidence pose risks to the outlook. Australian shares The Australian share market rose 2.9% in the quarter finishing the year up 5.3%, underperforming global shares. Falling commodity prices drove this underperformance as resources shares fell 13.1% in the quarter and 19.2% for the year. Global shares Global shares rose 4.0% in hedged Australian dollar (AUD) terms over the quarter. The US (S&P 500 Index) rose for the eighth straight quarter, rising by 4.4%, and 11.4% for the year. Japan’s TOPIX was also strong as the Bank of Japan announced more measures to support its economy. Meanwhile, a decline in the AUD saw global shares record a strong 8.2% gain on an unhedged basis. Emerging market shares underperformed developed market shares as falling commodity prices weighed on commodity producing nations, especially Russia. Global fixed interest Global fixed income markets were up 2.9% in hedged AUD terms in the quarter, and a strong 10.4% for the year. Bond yields fell on declining inflation expectations as a result of lower oil prices and continued concerns over global growth. Market expectations for government bond purchases by the ECB also assisted. Australian fixed income The Australian fixed income market outperformed global fixed income with a strong 4% rise in the quarter as falling commodity prices saw markets move to expect rate cuts by the Reserve Bank of Australia in 2015.
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