Christian Super Investment Update August 2017

Economic Commentary

Domestic – Australian GDP grew 0.8% in the June quarter compared with a negative growth of 0.3% over the previous quarter, driven by a solid recovery in net exports and consumer spending. Yearly inflation rate was 1.9% over the twelve months to the June quarter, compared with 2.1% the previous quarter. Wholesale electricity prices rose sharply over the first half of 2017, which led to significant increases in prices for retail customers. Ongoing concerns about energy security, reliability and costs remain, with potential adverse outcomes on CPI in the foreseeable future. Meanwhile, the Reserve Bank of Australia left interest rates on hold.

Global – Economic data was generally modest in the developed world. US non-farm payrolls were at the lowest in three months and below expectations. Geopolitical issues dominated where the tension between North Korean and the US continued to escalate. Gold rallied on the back of this while oil prices moved sideways despite the impact of hurricanes on oil refineries around the Gulf of Mexico.

Market Commentary

The Australian equity market finished slightly higher (+0.8%) for the month. The corporate reporting season, where most companies announced their financial results in August, were below market expectations. Best performing sectors included Consumer Staples due to the strong prospect of sales growth in selective segments. Resources and related stocks also finished strongly underpinned by rising commodity prices. The Telecommunication sector disappointed in many respects with a view that the whole industry is facing increased competition.

Global equity markets were generally mixed, with emerging markets being the standout performers. US equities finished ahead (+1.0%).

Listed property sector performed well and rose 1.5% for the month.

Fixed income asset class had a positive month with bond yields falling in most developed economies with the exception of Australia, where yields rose marginally.

The Australian dollar remained stable while the US dollar lost ground against most major currencies on the back of ongoing political tensions.

Table: Asset Class Return*

August 2017 YTD 12 Months To August 2017
Australian Equities 0.78% 0.76% 9.54%
International Equities 1.04% -0.21% 10.97%
Property 1.51% -3.21% -6.73%
Fixed Income 0.18% 0.64% 2.27%
Cash 0.14% 0.29% 1.76%

*The benchmark investment performance for the Fund’s major listed asset classes for the period ending August 2017

Factors to Watch

Growing geopolitical risks, including the political turmoil in the US, conflicts in Russia, North Korea and Middle East, continue to exacerbate uncertainty across markets, and heighten volatility. Focus will be drawn from market observers in late September where a Federal election will be held in Germany to elect a new Chancellor. The insurance sector will be under close scrutiny given the recent floods in America. On the domestic front, housing and labour markets will remain key factors for the Reserve Bank of Australia to consider for future interest rate direction.