Overseas developed shares was one of the few asset classes (alongside Cash) to experience a positive return over September 2018, with equities hitting new highs but closing cautiously. Overseas developed shares (hedged) returned 0.8% whilst Global Real Estate Investment Trusts (REITs) (hedged) produced the lowest asset class performance (-1.8%) over September, reflecting additional pressure from higher interest rates. Trade developments continued to weigh on market sentiment as the United States (US) reached trade agreements with Canada, Mexico, South Korea and Japan.
However, the spotlight remained strongly on the US-China trade relationship as President Trump slapped a 10% impost on roughly $US200 billion of imports. In retribution for the new levies, China imposed tariffs of up to 10% on US$60 billion of American goods, effective 24 September 2018.
The Australian equity market underperformed its hedged international counterpart index over the month, as the S&P/ASX 300 Index decreased 1.2%. The S&P/ASX Small Ords was the strongest relative performer, decreasing 0.4%, while the S&P/ASX 50 was the weakest, decreasing 1.4% over the month.
The best performing sectors were Energy (+4.3%) and Materials (+4.1%), while the weakest performing sectors were Healthcare (-7.3%) and Consumer Discretionary (-3.8%).
The largest positive contributors to the return of the index were BHP, Rio Tinto and South32, with absolute returns of 4.7%, 8.7% and 13.0% respectively. In contrast, the most significant detractors from performance were CSL, ANZ and Aristocrat Leisure with absolute returns of -11.5%, -4.1% and -9.9% respectively.
The broad MSCI World ex Australia (NR) Index increased 0.8% in hedged terms and 0.6% in unhedged terms over the month, as the AUD appreciated against some major currencies. The strongest performing sectors were Energy (+2.9%) and Telecommunication Services (+2.1%), while Real Estate (-2.4%) and Financials (-0.6%) were the worst performers. In AUD terms, the Global Small Cap sector was down 1.5% and Emerging Markets was also down 0.6% over September.
Over September, the NASDAQ decreased 0.8%, the S&P 500 Composite Index increased by 0.6% and the Dow Jones Industrial Average increased by 2.0%, all in USD terms. In local currency terms, major European equity markets generally experienced positive returns as the FTSE 100 (UK) increased 1.2% and the CAC 40 (France) increased by 1.7%, whilst the DAX 30 (Germany) decreased by 0.9%. In Asia, the Japanese TOPIX (+5.5%) and Chinese SSE Composite (+3.5%) increased, the Hang Seng remained flat and the Indian S&P BSE 500 (-8.8%) decreased over September.
The AUD remained relatively flat against the USD over September, finishing with a level Trade Weighted Index of 62.2 on 30 September 2018. The AUD appreciated against the Yen (+1.7%) and depreciated against the Pound Sterling (-1.0%) and the Euro (-0.2%). On a tradeweighted basis, the local currency remained flat over the month.