Series Highlights
Series 1
In equity markets, the S&P/ASX 200 index gained over 22% in the quarter ending September 2009. The material & energy sectors, major banking stocks and a recovery in global markets have had a strong influence on the rise in the index.
By the end of the September quarter, markets predicted a rise in the cash rates and this was reflected in an increase in the short-dated interest rates. The Reserve Bank of Australia raised cash rates by 25 basis points in October, recognising an improving domestic economy. Correspondingly, longer term rates have increased, albeit not to the extent of short term rates.
The performance of the ASX 200 Investments resulted in an increase in their fair economic value of 1.38% for the quarter. This was largely due to a rise in equity markets. However, that rise was off-set by a fall in market volatility and a rise in interest rates which has the effect of lowering their fair economic value.
Series 2
In November, the index fell sharply along with other world stock markets, when Dubai World (Dubai’s private investment company) made a decision to postpone its debt repayments and investors feared another financial crisis. However, such fears were not borne out and investors’ reaction to the news appeared excessive as the markets quickly began to recover lost ground.
Positive retail sales figures both domestically and in the US in early December assisted with a modest rise in the index through December 2009. The final result was that the S&P/ASX 200 index gained around 6% for the two months since inception to December 2009.
The Reserve Bank of Australia raised cash rates by 25 basis points in each of their October, November and December meetings taking the official interest rate to 3.75%. The RBA has raised interest rates towards a neutral basis stating that ‘the downturn in Australia was relatively mild, and measures of confidence and business conditions suggest that the economy is in a gradual recovery’.
The performance of the ASX 200 Choices since inception resulted in an increase in NAB’s calculation of the fair economic value of 0.56% for Strategy A and 1.57% for Strategy B. The rise in value was influenced by a modest rise in equity markets, although the increase in interest rates had a negative effect on the fair economic value.
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