The start of 2016 began on a treacherous note for risk asset investors as equity and commodity markets plunged over the first month. The MSCI World ex Australia Unhedged index returned -3.2% for the month, with the MSCI Emerging Markets index lagging the developed market index to return -3.8%. Chinese equity market volatility was reinvigorated with the release of a weak gross domestic product (GDP) data report, helping to trigger a 22.6% fall in the Shanghai Composite Index over the month despite stabilisation efforts by the People’s Bank of China (PBoC).
Australian Equities brought weak returns over January as the S&P/ASX 300 Accumulation Index fell 5.4%. From a sector perspective; Property Trusts (+1.0%), Utilities (+0.7%) and Telecom Services (+0.7%) were the strongest performers, while Materials (-9.1%), Financials ex Prop (-8.9%), and Energy (-6.5%) were the weakest. The Australian Small Companies Index outperformed Australian large caps, with a return of -5.1% for the month.
Global Equities returned -5.4% in hedged (Australian dollar) terms, and -3.2% in unhedged (Australian dollar) terms as the Australian dollar depreciated against the USD over the month. Global Small Caps underperformed the broad cap index returning -5.1%, while emerging markets retraced further, returning -3.8% (both in Australian dollars unhedged). In the US, the S&P500 returned -5.0%, while the NASDAQ returned -7.9% in USD terms. Outside of the US, Japan returned -7.4%, the UK -2.5%, India -5.8% and Germany -8.8%, all in local currency terms. In other regions, China fell 22.6% while Hong Kong fell 10.2% (returns in local currency terms). Across the sectors, Utilities (+4.4%), Telecommunication Services (+3.2%), and Consumer Staples (+2.8%) were the strongest performers, while Materials (-7.6%), Financials (-7.3%) and Healthcare (-5.2%) were the weakest (all in Australian dollar terms).
Over January, the Australian dollar broadly depreciated with falls of -2.8% against the Euro, -3.1% against the Japanese Yen and -2.8% against the USD while appreciating marginally (+0.3%) against the Pound Sterling. The Australian dollar finished the month at USD0.707 on 31 January 2016. On a trade-weighted basis, the Australian dollar fell 1.9% for the month.