ANZ Smart Choice Super Investor Update : Member Update Winter 2015
anz.com WHAT IS CAUSING SHARE MARKET FALLS? The past few weeks have been a rough period for share markets reflecting the risk of a significant shortfall in global growth. This risk is being driven by factors including: • Sustained slowing in Chinese growth. Although it’s no secret that the Chinese economy has been slowing since 2010, anxiety has heightened of late, following the recent currency devaluation and share market volatility. While Chinese policymakers have been quick to act with measures to reduce fears of a more worrying slowdown in growth, on Friday the release of much softer Chinese manufacturing data suggested that growth is likely to continue to slide and government support measures to date haven’t been enough to stabilise growth. • Continued softening in Chinese growth is now eroding the growth outlook across other emerging economies. Initially softer Chinese growth showed up in sharply weaker commodity prices, but this softer growth has combined with a ramp up in debt across other emerging markets. These emerging economies are now facing similar problems to the developed world during the global financial crisis – weaker growth, higher rates and higher debt. • If the US Federal Reserve (Fed) were to lift interest rates in September for the first time in nine years, this could be expected to add to the headwinds to the emerging economies and global growth. Investors have been used to a near zero US interest rate for six years and there are fears that raising rates now will cause further share market falls and harm fragile growth. WHAT’S AHEAD? Our assessment of global growth through 2015, and the broadening weakness across the emerging markets drove our decision to be more negative towards shares and build cash. As a result we continue to hold a negative view of emerging market shares, Australian shares and the Australian dollar. Markets have now swiftly moved to price for a period of weaker global growth. While this shift is likely justified and overdue, the key issue is whether the magnitude of the correction, particularly across the developed markets, has been too severe. While we do not consider that developed economies will be able to completely resist the slowdown from emerging markets, particularly China, there are a number of positive factors supporting developed economies and China still has scope to ramp up the measures to support growth. On balance we consider that returns may be much softer than over recent years. However, our sense is that the resilience of the developed economies means the current episode is a bump in the road rather than a breakdown. Disclaimer: This information is issued by the Australia and New Zealand Banking Group Limited (ABN 11 005 357 522, AFSL 234 527). The information is current as at 24 August 2015 and is subject to change. The information is general in nature and does not take into account your personal objectives, needs and financial circumstances. You should consider the appropriateness of the information, having regard to your personal objectives, needs and financial circumstances. This information is not to be construed as personal advice, and should not be relied upon as a substitute for professional advice. Although all the information in this document is obtained in good faith from sources believed to be reliable, no representation of warranty, express or implied is made as to its accuracy or completeness. Past performance is not indicative of future performance. The value of investments may rise or fall and the repayment of subscribed capital is not guaranteed. Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522. Australian Credit Licence Number 234527. ANZ’s colour blue is a trade mark of ANZ. Item No. 951038L 09.2015 W456922 MARKET FLASH ANZ GLOBAL WEALTH CHIEF INVESTMENT OFFICE IS GLOBAL GROWTH SHIFTING GEARS? THE RECENT SHARP DECLINES IN SHARE MARKETS HAVE RAISED FEARS THAT THE GLOBAL ECONOMY IS HEADING TOWARDS A SHARP SLOWDOWN. HAVE WE HIT A GROWTH SPEED BUMP OR A GROWTH BREAKDOWN?
Member Update Autumn 2015