Financial year market summary

1 July 2008 - 30 June 2009 

After the sustained decline that began in November 2007, the markets have been regaining some ground since March 2009. Although annual super returns are still largely negative, they are better than they would have been if the downward trend from June 2008 to February this year had continued.

Four month rally halts long decline

The April 2009 Market Barometer report by Russell Investments cites three factors in the US that triggered the rally in global equity markets: an unexpectedly strong profit forecast from Citigroup, the Obama administration's plan to clear banks of toxic assets and so-called 'green shoots' in such economic indicators as consumer spending and the housing market.

A resurgence in manufacturing is the most reliable indicator of sustainable economic recovery. The good news is that positive signs outlined above have been underpinned by increasing manufacturing activity in the US and China. 

Even though the current rally has been longer lasting than many market analysts predicted, many believe that there will be further falls in share value before the economy really starts to turn around.

Not bearing the full brunt

Although times are tough, a combination of the Government's stimulus measures and interest rate cuts have kept the Australian economy in relatively good shape by international standards:

  • In the March quarter, Australia's GDP rose by 0.4% - outperforming every other advanced economy, and (technically at least) keeping us out of recession.
  • Our housing market remains strong, largely thanks to the extension of the first-home owners' grant. The latest building approval figures released, for April, were up 5.1%.
  • Unemployment is at 5.7%, which compares favourably with 7.1% in the UK and 9.4% in the US, although some analysts still anticipate that we will reach a peak of around 9%.
  • The Australian dollar continued to gain strength against the US dollar and other international currencies in the March quarter.

The market movements

  • The Australian stock market returned -20.3% (S&P/ASX300 Accumulation Index) over the 2008/09 financial year. The major sectors that contributed to this negative performance were the resource sector and listed property, posting declines of -30.4% and -42.1% respectively.  Financial stocks closed the year down -13.4%, an improvement on earlier in the year when banking stocks had fallen by over 35%.
  • International stock markets returned -16.2% (MSCI World Ex Australia in $A (unhedged)) and     -26.6% on a fully hedged basis. Whilst the US stock market posted one of its strongest ever rallies over the months of March and April 2009, the financial year’s decline was -28.2% for the S&P500 and -25.6% for the Dow Jones index. Technology stocks were also negative, returning -20% (NASDAQ).  European markets mirrored the US experience with the UK stock market returning -24.5% (FTSE), the German DAX dropping -25.1% and the French CAC index down -29.2%.   
  • Government bonds were the largest contributor to the UBS Australian Composite Bond Index posting a 10.8% return. A similar theme was experienced in international bond markets with the Barclays Capital Based Aggregate Index (hedged to $A) returning 9.9%.
  • The reduction to official interest rates over the year contributed to the UBS Warburg Australia Bank Bill Index posting 5.5%.

Telstra Super's performance

Accumulation investment returns to 30 June 2009*

 12 months  3 years  5 years  10 years Since inception
Growth  -14.42%  -3.43%  4.18%  4.72%  6.15%
Balanced  -10.62%  -1.01%  5.10%  5.39%  6.51%
Conservative  -3.30%  2.23%  4.99%  5.26%  5.26%
Australian Shares  -15.93%  -1.55%  8.29%  -  7.65%
International Shares  -12.53%  -4.87%  1.79%  -  0.18%
Property -35.69% -15.77% -3.27% - -1.26%
Fixed Interest 3.78% 3.19% 3.88% - 3.90%
Cash 4.74% 5.23% 5.11% 4.75% 4.68%

* These returns do not apply to Telstra Super RetireAccess members. Further details. Past performance is not a reliable indicator of future performance.

Telstra Super RetireAccess investment returns to 30 June 2009*

 12 months  3 years  5 years  10 years Since inception
Growth  -16.83%  -4.21%  4.36%  5.15%  5.48%
Balanced  -12.35%  -1.45%  5.50%  6.00%  6.20%
Conservative  -4.15%  2.33%  5.59%  6.01%  6.01%
Australian Shares  -18.40%  -2.04%  8.91% -  8.17%
International Shares  -14.38%  -5.69%  1.73%  -  -0.10%
Property -40.52% -18.47% -4.27% - -1.95%
Fixed Interest 4.41% 3.79% 4.58% - 4.61%
Cash 5.55% 6.13% 5.99% 5.59% 5.55%

* These returns do not apply to Accumulation members. Further details. Past performance is not a reliable indicator of future performance.

 

How Telstra Super is positioned

Different asset classes lose value at different rates in any downturn. One notable anomaly over the last two years is that Australian unlisted property has retained most of its value while listed property has fallen dramatically. In the 12 months to March 2009, listed property fell by 58.1% while unlisted property was only down 4.9%.

This large discrepancy has delayed the full impact of the downturn for some investors, but they face an inevitable correction as unlisted property 'catches up' by going down until it is comparable to listed property again. Telstra Super's diversified and property investment options will be largely insulated from the impact of that catch-up as these options invest more heavily in listed property than unlisted.

Telstra Super is confident the fund is well positioned for a rebound. We will continue to be conservative in our approach to risk, both by maintaining an emphasis on diversification and through careful selection of individual assets. More specifically, our current preference for listed property should protect us against the expected rapid drop in unlisted property over coming months. 

Telstra Super will keep our members up to date on market changes. Daily unit prices are available at any time, and Telstra Super provides a quarterly investment e-newsletter - subscribe to receive your copy online.