March Market Update

The S&P/ASX300 accumulation index was essentially flat across March returning just +0.2% for the month, although still +2.0% for the quarter. Global equity markets ended the quarter little changed (MSCI Global +0.8%, USD).

Equity markets contended with a flare-up of geopolitical tensions as Russia annexed Crimea, and increasing concerns around China’s economic health. Additionally, the US Fed once again tapered its purchases of Treasury and mortgage-backed debt securities. Domestically, the positive economic data suggests the economy may be passing its cyclical low.

The best performing sector in March was Financials, followed by Telecommunications. The worst performing sectors were Materials and Consumer Staples.

This month we continue our consideration of the risks facing the Chinese economy. The transition of the Chinese growth model from an export and investment led model to a consumption led growth model is underway. There are a number of associated structural imbalances arising from the existing model. The risk of a policy mis-step in China is rising as these issues are addressed.