Despite many markets finishing relatively flat for September 2016, there was still plenty for investors to contend with during the month. The Bank of Japan unveiled possibly the biggest news to the market in September, releasing its plan to target 0% for the 10-year JGB yield and an intention to overshoot its 2% inflation target. The aim is to minimise flattening of the JGB yield curve. The United States (US) Federal Reserve (Fed) was less active in September, keeping interest rates at 0.25% to 0.50%; however Yellen didn’t rule out the case for a further 2016 rate hike. Many eyes were poised on the first of the presidential debates with neither competitor giving much ground away. Most polls still reveal Clinton holding an edge however markets will continue to watch closely leading up to November.
The Australian equity market strengthened over September, with the S&P/ASX 300 Accumulation Index returning 0.5% for the month. There were positive returns across the majority of the market spectrum, the exception being the S&P/ASX Mid 50 Accum, returning -1.0% for the month. The best performing sectors were Materials (+5.7%) and Consumer Staples (+1.6%). The weakest performing sectors were Telecom Services (-4.0%) and Real Estate (-4.0%). The largest positive contributors to the return of the index were BHP, South32 and ANZ, with absolute returns of 9.7%, 26.3% and 3.3% respectively. In contrast, the most significant detractors from performance were Scentre Group, Santos and TPG Telecom with absolute returns of -5.1%, -18.7% and -29.3% respectively.
The broad MSCI World ex Australia Index was up 0.3% in hedged terms and -1.3% in unhedged terms over the month, as the Australian dollar appreciated against most major currencies over September. The strongest performing sectors were Energy (+1.0%) and Information Technology (+0.7%), while Telecommunication Services (-2.2%) and Healthcare (-1.9%) were the worst performers. In Australian dollar terms, the Global Small Cap sector decreased -0.3% while Emerging Markets dropped -0.5% in unhedged Australian dollar terms. Over August, the NASDAQ returned 1.9%, the S&P 500 Composite Index was flat and the Dow Jones Industrial Average returned -0.4%, all in US dollar terms. European markets experienced mixed returns, with the FTSE 100 (UK) up 1.8%, DAX 30 (Germany) down -0.8% and the CAC 40 (France) receiving 0.4%. In Asia, the Indian BSE 500 was down -1.1%, the Hang Seng Index up 1.8%, the SSE Composite (China) down -2.6% and the Japanese TOPIX up 0.3%.
The Australian dollar rose against most currencies over September, finishing at US$0.765 with a Trade Weighted Index of 63.9 on 30 September 2016. The Australian dollar appreciated against the US dollar (1.8%), the Euro (0.9%) and the Pound Sterling (+2.5%) but continued its depreciation against the Yen (-0.5%). On a trade-weighted basis, the local currency increased 1.1% over the month.