Market Commentary – September 2017

by Chris Limberg on Sep 30, 2017

Market Commentary – September 2017

The ASX200 index continues to trade in a sideways holding pattern falling 0.7% to 5,681 for the quarter. Banking stocks continue to be subdued whereas material stocks like BHP and RIO have performed strongly balancing out overall market performance.

Australia’s economic outlook is improving and growth is expected to pick up to trend in the coming years. Supported by improving non-mining business conditions and a large pipeline of infrastructure projects. Employment is improving with under employment set to ease slowly over time which is anticipated to drive wage growth. The outlook of leading predictors for the next interest rate movement indicate an increase in 2018.

Australia

  • The Reserve Bank of Australia (RBA) maintained the cash rate at 1.50% p.a.
  • In the labour market unemployment rose marginally by 0.1% up to 5.6% with increased employment enticing more workforce participation, hence the raise in unemployment, and under employment is expected to decrease as the economy improves. Should this trend continue wages growth will likely strengthen
  • The housing market is showing signs it has peaked with the Sydney property market prices and clearance rates falling in the key spring season although the Melbourne market continues to forge ahead
    • Board members again noted the increase of apartments due for completion in Eastern capital cities
  • The Australian dollar remains strong rallying as high as US$0.81 pressuring the Australian economy before easing back to end the quarter at US$0.78
  • The inflation rate has fallen over the quarter from 2.1% down to 1.9% p.a. encouraging the RBA to hold on any interest rate movements

US

  • US Stock markets recorded another robust quarter with the DOW increasing 4.7% and the S&P 500 3.6% driven mostly by FANG stocks (Facebook, Amazon , Netflix and Google who changed their name to Alphabet)
  • The political environment remains dominated by North Korea as they continue to push for intercontinental capable nuclear weapons.

Portfolio Update

We have participated in an IPO the “MCP Master Income Trust”, ASX code MXT, which specialises in Australian corporate debt. The goal of the investment is to provide stable monthly income approximately 2.5% higher than the official RBA rate with relative low risk. The Australian corporate borrowers include such household names as Energy Australia and Woolworths.

Abundant Produce, ASX code ABT, continues to progress recently raising additional funds to accelerate the commercialisation of their personal care products in China having secured market access through Woolworths Tmall flagship store (see here for explanation of the platform). ABT also produce seeds the first of which is now available on their website with 3 different kinds of cucumber. The highly anticipated tomato seed to follow in 2018. This will then be followed by eggplant, capsicum and zucchini which are progressing through the development phase.

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