October, 2022
The S&P/ASX 200 Accumulation Index rose 6.04 % over the month. Australian equities were mid-pack relative to other global equities in September. Global developed markets rebounded strongly, as investors became optimistic that central bank tightening was close to done. All major markets finished the month up.
In local currency terms the DJ Euro Stoxx 50 returned 9.1%, the US S&P 500 returned 8.1%, the UK’s FTSE 100 returned 3.0% and Japan’s Nikkei 225 returned 6.4%. Monetary policy settings continued to tighten as the Reserve Bank of Australia (RBA) raised the cash rate target by another 25 bps, to 2.60% in October. While the pace of increases slowed, the RBA also flagged further increases in the months ahead, as part of the process of normalising monetary conditions, albeit subject to future economic data. The board remains committed to ensuring inflation returns to the target range of 2-3%.
The run of strong domestic data releases continued through October. Retail turnover posted the ninth straight month of growth, up 0.6%. Business turnover for August increased in 12 of the 13 major sectors, with large increases in transport and manufacturing. The only sector seeing deterioration was information media & telecommunications. Inflationary pressures remain significant. The annual inflation rate in Australia climbed to 7.3% in Q3 of 2022 from 6.1% in Q2, above market forecasts of 7.0%. This was the highest rate since Q2 1990, boosted by higher prices for new dwelling construction, automotive fuel, and food. The Producer Price Index for the September quarter also showed continued pressure, particularly in building and engineering construction and electricity, gas and water.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_Oct_2022.pdfSeptember, 2022
The S&P/ASX 200 Accumulation Index was down 6.2% during the month. Australian equities outperformed global equities in September, with the size of our Materials sector a differentiating factor. Global developed markets continued to sell off through September as central banks continued to tighten rates. All major markets finished the month down. In local currency terms the DJ Euro Stoxx 50 returned -5.6%, the US S&P 500 returned -9.2%, the UK’s FTSE 100 returned -5.2% and Japan’s Nikkei 225 returned -6.9%.
Monetary policy settings continued to tighten as the Reserve Bank of Australia (RBA) raised the cash rate target by another 50 bps, to 2.35% in September. The RBA also flagged further increases in the months ahead, as part of the process of normalising monetary conditions, albeit subject to future economic data. The board remains committed to ensuring inflation returns to the target range of 2-3%.
Domestic economic data releases were mostly positive through September. The Australian economy expanded by 0.9% in Q2, slightly below market forecasts of 1.0%. August employment remained robust, with total employment increasing by 33,500 positions, reversing the unexpected decline seen in July. While the unemployment rate ticked up 0.1ppts to 3.5%, this was a function of an increase in the participation rate. Job vacancies remain extraordinarily elevated with 474k unfilled roles. Retail sales remained resilient, increasing by 0.6% in August. This is the eighth month of consecutive increases. Within the subcategories, household goods returned to growth while clothing, footwear & personal accessories and other retailing both reported declines. The NAB Survey of Business Conditions increased further. Notably the survey suggested some slowing of growth in input costs. Capacity utilisation remains high across all sectors, supporting continued strength in employment.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_Sep_2022.pdfAugust, 2022
The S&P/ASX 200 Accumulation Index returned 1.2% during the month. Australian equities outperformed global equities in August on the back of a resilient local reporting season. Global developed markets struggled in August as the rate tightening resolve from the US Federal Reserve dampened investor sentiment. In the major developed markets (in local currency terms), the DJ Euro Stoxx 50 returned -5.1%, the US S&P 500 returned -4.1% and the UK’s FTSE 100 returned -1.1%. In contrast, Japan’s Nikkei 225 returned 1.1%.
Monetary policy settings continued to tighten as the Reserve Bank of Australia (RBA) raised the cash rate target by another 50 bps, to 1.85% in August. The RBA expects further tightening in the process of normalising monetary conditions as they are committed to ensuring that inflation returns to the target range of 2-3%.
Domestic economic data releases in August were mixed. Employment unexpectedly fell by 40,900 positions in July, the first fall in nine months. The unemployment rate fell to a new record low of 3.4%, which was also below market expectations. The NAB Survey of Business Conditions strengthened by 6 points to 20 index points in July. Business confidence rebounded 5 points in July, to 7 index points. Retail sales were up 0.2% in June. CoreLogic’s National Home Value Index recorded a fourth consecutive month of value declines, down 1.6% in August.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_Aug_2022-1.pdfJuly, 2022
Key contributors to relative performance: • The nil holding in Newcrest Mining contributed to performance. Newcrest Mining underperformed on weaker gold prices. In company specific news, while Newcrest’s quarterly results narrowly beat consensus, production concerns were raised around cost inflation. • The overweight in Insignia Financial contributed to performance. Insignia outperformed following an update highlighting a continuation in the improvement of net flows (before pension payments) into its platforms, and it has now reported positive net flows.
Key detractors from relative performance: • An overweight position in QBE Insurance detracted from performance. QBE underperformed as the general insurance sector fell on the back of falling bond yields as recession concerns elevated. • The overweight position in Ramsay Health Care detracted from performance. Despite a nonbinding takeover offer to acquire the business by KKR. Ramsay’s share price has drifted whilst waiting for the deal to progress.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_Jul_2022-1.pdfJune, 2022
The Fund outperformed the benchmark over the month. Key contributors to relative performance: • Woodside Energy outperformed, as the BHP Petroleum merger came into effect and was viewed favourably by the market dispelling fears of substantial forced net selling by BHP shareholders who received Woodside Energy stock in exchange for the Petroleum assets. Oil prices were volatile through the month, but little changed as supply concerns and recession risks appear more balanced in oil markets than for metals.
• Coles outperformed, as prospects of a recession and along with higher inflation, led investors to favour the defensive characteristics of its supermarket business. The supermarket industry is rational, with cost inflation being readily passed on to consumers, Coles is expected to perform well in this economic environment.
Key detractors from relative performance: • 29Metals underperformed the market largely on the back of falling commodity prices, particularly copper and fears of a more prolonged slowdown in China’s property sector. • The underweight holding in CSL detracted from performance. Behring’s the main blood plasma dependent business unit’s outlook was boosted by data released by the Plasma Protein Therapies Association, confirming previous statements by CSL that plasma collections had recovered to prepandemic levels. • The nil holding in Woolworths detracted from performance. Woolworths outperformed as investors become increasingly concerned about prospects of a recession and a higher inflation outlook, the market valued the defensive qualities of its supermarket business.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_Jun_2022-1.pdfMay, 2022
Key contributors to relative performance:
• The nil holding in Goodman contributed to performance. Goodman underperformed the market after Amazon reported a softening of consumer demand and may have over-committed to industrial space used to manage its inventory.
• The nil position in Macquarie contributed to performance. Macquarie reported a record full year profit result driven by very strong market facing business income and asset sales. However, guidance for FY23 was typically conservative and below FY22 and thus the stock underperformed
Key detractors from the relative performance:
• The underweight holding in Commonwealth Bank (CBA) detracted from performance. CBA outperformed after the banks announced results which indicated that margins would improve as rates rise.
• Coles detracted from performance. Along with other consumer staples, Coles gave back the outperformance of the previous month due to weak results from Walmart and Target in the US. However, these results are not relevant to Coles as the issues were in the general merchandise areas, not groceries.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_May_2022-1.pdfApril, 2022
Key contributors to relative performance: • The overweight position in Ramsay Health Care contributed to performance, on the back of a conditional, non-binding indicative proposal from a consortium led by private equity firm KKR. The proposal to buy 100% of the shares in Ramsay at $88 was pitched above the prevailing share price of $65.
• The holding in QBE Insurance contributed to performance. As bond yields continued to rise, improving investment earnings on its premium float are expected to have a meaningful impact on profits.
• The overweight holding in Coles contributed to performance, as expectations of interest rate rises led to outperformance by defensives. • The nil holding in Block contributed to performance. Block continues to be adversely impacted by the derating within the Nasdaq
Key detractors from relative performance: • The overweight holding in Aristocrat Leisure detracted from performance. The conflict in the Ukraine continues to weigh on the company, given it has design studios located in affected areas.
• The holding in Insignia Financial detracted from performance. Insignia’s quarterly business update showed an improvement in its fund flows but was more than offset by the impact of negative market returns on its funds.
• The underweight holding in CSL detracted from performance. CSL outperformed the market on positive incremental news with regard to recovery
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/TASWF_Fund_Update_Apr_2022.pdfJuly, 2021
The S&P/ASX 200 Accumulation Index returned 1.1% during the month. Australian equities lagged global markets which had mixed results in July. In the major developed markets the US S&P 500 was up 2.4%, the DJ Euro Stoxx 50 was up 0.8% and the UK’s FTSE 100 was up 0.1%. Japan’s Nikkei 225 was the laggard, down 5.2% (in local currency terms).
Monetary policy settings remained unchanged in July, as the Reserve Bank of Australia (RBA) maintained both the cash rate and 3 year yield target at 0.10%. The RBA also indicated it will maintain its government bond purchase program.
Domestic economic data releases in July were mixed. Q2 inflation was 0.8% for the quarter, but spiked to 3.8% for the year to the June quarter, largely reflecting the unwinding of some earlier COVID-19-related price declines. Employment rose by 29,100 positions in June. The unemployment rate fell to 4.9%, the eighth straight monthly fall. The NAB Survey of Business Conditions fell 12 points, to 24, down from its record high in May. Business confidence fell sharply, down to 11 (from 20 the month prior) as the latest COVID-19 outbreaks dented confidence. Retail sales rose 1.1% in April, which was in line with expectations. National CoreLogic dwelling prices saw another consecutive monthly rise in July, ending the month up 1.6%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/naswf_fund_update-3.pdfJune, 2021
The S&P/ASX 200 Accumulation Index returned 2.3% during the month. Australian equities outperformed in June on the back of favourable economic data and commodity prices remaining elevated. In major global developed markets the US S&P 500 was up 2.3%, the DJ Euro Stoxx 50 was up 0.7% and the UK's FTSE 100 was up 0.4%. Japan's Nikkei 225 was the laggard, down 0.1% (in local currency terms).
Monetary policy settings remained unchanged in June, as the Reserve Bank of Australia (RBA) maintained both the cash rate and 3 year yield target at 0.10%. The RBA also indicated it will maintain the parameters of the government bond purchase program.
Domestic economic data releases in June were mostly upbeat. March 2021 GDP was up 1.8%, which exceeded expectations, while the annual growth rate was 1.1%. Employment rose by 115,200 positions in May, significantly exceeding market expectations. The unemployment rate fell to 5.1%, the seventh straight monthly fall and lowest rate since February 2020. The NAB Survey of Business Conditions reached another record high of 37 in May. Business confidence however fell slightly, down to 20. Retail sales rose 1.1% in April, which was in line with expectations. National CoreLogic dwelling prices saw another consecutive monthly rise in June, ending the month up 1.9%
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/naswf_fund_update-2.pdfMay, 2021
The Fund outperformed the benchmark over the month. Key contributors to relative performance:
• The nil holding in Afterpay Afterpay Afterpay contributed to performance. Afterpay materially de-rated as many global (profitless) technology stocks fell precipitously during May.
• QBE Insurance outperformed as global peers highligh QBE Insurance ted the continuation of strong double digit premium rate increases in commercial insurance lines globally, which appears to be flowing into improvements in profitability. This improvement was confirmed by QBE at their AGM in May.
• Westpac contributed to performance. Banks reported Westpac during May, with results generally well received with impairments at extraordinarily low levels due to writebacks and little mortgage stress.
• The nil holding in Macquarie Group Macquarie Group Macquarie Group contributed to performance as the stock underperformed. Macquarie's full year result was within market expectations. However, negative press around the recent Nuix IPO weighed on the stock, given there have been three downgrades post the December IPO and Macquarie still holds circa 30% of Nuix.
• Aristocrat Leisure outperformed after delivering a Aristocrat Leisure 1H21 result well ahead of market expectations. Continued market share gains in the land-based business and digital business places the company in a good position to capitalise on the continued economic recovery.
Key detractors from relative performance:
• The underweight in Commonwealth B Commonwealth B Commonwealth Bank (CBA) detracted from performance. Banks outperformed as the economy continues to re-open and credit risks continue to decline.
• Our holding in Oil Search Oil Search Oil Search detracted from performance. Local oil and gas stocks underperformed the market in May, despite oil prices rising ~3% over the month.
• Our underweight in CSL detracted from performance. CSL outperformed, as the US vaccination roll-out progresses and mobility improves, a recovery in collection volumes is expected, reducing downside risk to near-term earnings.
• Ramsay Healthcare detracted from performance. The Ramsay Healthcare underperformance followed the company's presentation at a conference in May, with the market seeming underwhelmed with the recovery in activity.
• Nufarm underperformed despite delivering a very str Nufarm ong 1H21 result. The underperformance was most likely fuelled by the weaker outlook commentary for 2H21.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/naswf_insto_fund_update.pdfApril, 2021
The Fund underperformed the benchmark over the month. Key contributors to relative performance:
• The nil holding in Woolworths Woolworths Woolworths contributed to performance as the stock underperformed. Woolworths released its Q3 sales result, and while it was in-line with market expectations, the market was disappointed with the flat sales reported for the first three weeks of Q4.
• Viva Energy contributed to performance during April Viva Energy on the back of a strong trading update highlighting a good recovery in fuel volumes outside of Aviation and also strong retail margins.
• Downer outperformed after announcing further assets Downer sales, and a 10% on-market share buyback. The company also provided a relatively positive trading update at its strategy day.
• Iluka Resources outperformed, with the stock moving Iluka Resources higher on positive news flow from its quarterly report. Iluka's zircon sales were unseasonably strong in Q1 due to recovering demand. Titanium feedstock demand was also better than market expectations.
• Aristocrat Leisure outperformed on limited company Aristocrat Leisure news flow. That said, industry data suggests that the mobile gaming market continues to perform strongly, with Aristocrat a beneficiary of the industry tailwinds.
Key detractors from relative performance:
• Oil Search underperformed, despite Brent crude pric Oil Search es gaining circa 3% in April. Oil Search released a quarterly update but the key driver of share price performance was more likely macro in nature following OPEC+ confirming recommencement of the tapering process that would see oil volumes return to the market in an orderly fashion.
• Our nil holding in Fortescue Metals Fortescue Metals Fortescue Metals and Rio Tinto Rio Tinto Rio Tinto detracted from performance, as the stocks strengthened on the back of persistently elevated iron ore prices which are holding at levels far above the market's expectation
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/naswf_fund_update-1.pdfDecember, 2020
The Fund underperformed the benchmark over the month.
Key contributors to relative performance:
• Iluka Resources outperformed along with the broader mining sector. Iluka's significant China exposure aided its outperformance, as well as its residual exposure to iron ore through its 20% holding in the recently spun-out Deterra Royalties.
• BHP outperformed during the month. Commodities surged over December on optimism for China's ongoing strong demand for raw materials. Iron ore in particular has continued to defy market expectations.
• Metcash outperformed as the company released a strong first half result. The strong operating performance was led by the hardware division.
• The underweight position in CSL contributed to performance. The stock underperformed as the ongoing rise in COVID-19 infections in the US is again impacting plasma collection volumes. This will impact the availability of product in FY22.
• Our nil position in Cochlear contributed to performance. The stock underperformed driven by the ongoing growth in COVID-19 infections in the northern hemisphere. This will see a deferral of surgeries, impacting near-term earnings.
Key detractors from relative performance:
• The nil holdings in Fortescue Metals and Rio Tinto detracted from performance as material stocks outperformed following a surge in commodity prices during December.
• QBE Insurance underperformed during December after providing a disappointing market update. QBE flagged elevated catastrophe costs of circa USD 130 million, prior year reserve top ups of circa USD 470 million, as well as a meaningful non-cash write-down of assets.
• The nil holding in Afterpay detracted from performance. Afterpay rallied strongly post the announcement that it would be entering the ASX20 and ASX50 indices post the December quarterly rebalance.
• Lendlease underperformed. The company concluded negotiations with the Victorian Government regarding project over-runs on the Melbourne Metro project, with no further provisions required.
ticker: TYN0028AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.nikkoam.com.au/adviser/products/equities-funds/nikkoam-australian-share-wholesale-fund
Right sidebar -> Quick Links -> Monthly fund update (Advisor)
asset_class: Domestic Equity
asset_category: Australia Large Value
peer_benchmark: Domestic Equity - Large Value Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund
manager_contact_details: Array
fund_features:
Nikko AM Australian Share W aims to outperform the S&P/ASX 200 Accumulation Index by more than 2.5% p.a. over rolling five-year periods, before fees, expenses and tax. The Fund is a managed investment scheme that invests predominantly, directly or indirectly, in a selection of Australian shares, with a strong preference for readily marketable securities. The Fund is designed for investors looking for long-term returns (capital growth and income) from a portfolio of shares which is actively managed by an investment team that seeks to identify shares that represent good value.