Market summary - 30 September 2009 quarter

Strong rally continues

The quarter to 30 September saw continued investor confidence and economic recovery following the 'green shoots' in the economy toward the end of 2008/2009. The sharp turnaround since the market low-point on March 9, when the ASX value plummeted to 3052 points, does not show any immediate signs of faltering. By the end of September the MSCI World share price index gained 63%. The S&P/ASX 300 was up 51%.

The equity market rally was supported through merger and acquisition activity during the quarter, the most prominent in recent weeks being the attempted $20 billion takeover of Cadbury by Kraft, the world's second-largest food maker.

In Australia, there are particularly strong signs of economic recovery with increases in retail spend and high property sales. On 6 October the Reserve Bank of Australia (RBA) raised interest rates 25 basis points, making Australia the first developed nation to reverse the cycle of rate cuts triggered by the global financial crisis. However on 28 September, RBA Governor, Glenn Stevens, foreshadowed that the positive economic outlook Australia is experiencing should not be considered in isolation "Australia borrows in a global market. The long rate in Australia is driven more strongly by what happens in global markets than by what happens here." He further indicated that adjustments to fiscal and monetary policy to move back towards more normal settings should be expected during the recovery phase.

Australia has fared much better in comparison to other major world economies. According to Consensus Economics' July survey, the US economy will shrink by 2.6% this year, the European economy will shrink by 4.4% and the Japan economy will shrink by an alarming 6.2%. In comparison, Australia's economy is forecast to contract just 0.1% this year, largely due to the resilience of the Australian financial system, the Government's fiscal and monetary policy measures and continued export growth into China and the emerging markets.

The market movements

  • The Australian stock market returned 21.6% (S&P/ASX300 Accumulation Index) for the September quarter. The major sectors that contributed to the strong performance were the financials, listed property and industrials posting returns of  34.6% , 31% and 30% respectively. All the major ASX sectors posted positive returns ranging from 0.70% to 34.60%.
  • International stock markets returned 7.1% (MSCI World Ex Australia in $A (unhedged)) and 14.6% on a fully hedged basis. While the US stock market posted strong double digit returns of 15% for both the S&P500 and the Dow Jones index, it was an improving European economic backdrop that produced returns of 20.8% for the UK's FTSE, 20.9% for the French CAC and 18% for the German DAX. The emerging markets also posted strong positive returns with the exception of China's Shanghai composite index posting -6.1% for the September quarter.
  • Fixed interest markets continued to post positive returns over the September quarter as improving credit conditions resulted in returns of 1.80% for the UBS Australian Composite Bond Index and 3.86% for global fixed interest via the Barclays Capital Based Aggregate Index (hedged to $A).
  • The UBS Warburg Australia Bank Bill Index posted  a 0.80% return over the September quarter.

Peaks and troughs or sustained recovery?

Looking ahead there is cautious optimism that the financial crisis is over, however the consensus view is that the recovery is likely to be sluggish. Full-time employment is yet to stabilise and support from Government policies and stimulus measures is gradually diminishing, with the Federal Government's First Home Owner Boost reduced from 1 October 2009.

There are signs of improvement in the global economy, with increases in manufacturing production and some stablisation of the US housing market. However there is still some way to go; global sharemarkets, after the 50% rally, are still 40% below the 2007 peak.

Markets have not yet stabilised and judging from experiences of the past, we can reasonably expect a number of small declines before a full recovery. Following the Great Depression in 1929-1932 there were five strong rallies which were each followed by declines.

Telstra Super's performance

Accumulation investment returns to 30 September 2009*

3 months

 12 months

 3 years

 5 years

 10 years

 Since inception
Growth 14.07% 4.25% -0.25% 6.56% 6.09% 7.12%
Balanced 11.22% 3.95% 1.52% 6.89% 6.49% 7.27%
Conservative 5.60% 3.07% 3.31% 5.73% 5.75% 5.69%
Australian Shares 19.66% 11.75% 3.89% 11.03%  - 9.77%
International Shares 10.29% 3.13% -3.08% 4.19%  - 1.37%
Property 24.61% -17.88% -11.37% 0.17% - 2.65%
Fixed Interest 2.73% 4.82% 3.50% 4.03% - 4.22%
Cash 0.68% 3.71% 5.03% 5.00% 4.72% 4.64%

* 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 September 2009*

3 months

 12 months

 3 years

 5 years

 10 years

 Since inception
Growth 16.47% 4.60% -0.47% 7.13% 6.74% 6.85%
Balanced 12.97% 4.20% 1.48% 7.57% 7.27% 7.26%
Conservative 6.36% 3.12% 3.55% 6.43% 6.57% 6.50%
Australian Shares 22.22% 11.77% 4.04% 12.00% - 10.57%
International Shares 11.81% 3.57% -3.59% 4.45%  - 1.26%
Property 30.91% -19.52% -13.01% -0.01% - 2.84%
Fixed Interest 3.26% 5.71% 4.17% 4.77% - 4.99%
Cash 0.80% 4.35% 5.90% 5.87% 5.56% 5.49%

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

Telstra Super is confident the fund is well positioned for possible future declines, maintaining a conservative approach to risk while maximising opportunities for growth.

Telstra Super's most popular investment options, Growth and Balanced, have bounced back from the downturn and have recovered their position in the SuperRatings top quartile of superannuation funds, as illustrated below.

Percentile rank in SuperRatings graph