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| Kreston Dormers Financial Services Pty Ltd |
Please find below and attached our 'Weekly Market Update'.
We are continuing to get feedback and suggestions for improvement on the report, so if you have any suggestions please let us know
If you would like to discuss this email in more detail, please contact your financial adviser, Mark Johnson or Nick Pike on 1800 064 959.
Market Summary
The ASX 200 was -0.7 weaker on the back of a -2.0% fall in the Banking sector triggered by NAB’s takeover bid for Axa. In contrast all other sectors were positive for the week.
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Friday |
Week |
% |
| All Ordinaries |
4,634 |
-19 |
-0.4 |
| S&P / ASX 200 |
4,608 |
-31 |
-0.7 |
| Property Index |
863 |
12 |
1.4 |
| Utilities Index |
4,182 |
67 |
1.6 |
| Financials Index |
4,513 |
-92 |
-2.0 |
| Materials Index |
12,061 |
73 |
0.6 |
| Energy Index |
15,409 |
47 |
0.3 |
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Overseas, the US S&P 500 fell -0.5% as did the UK’s FTSE. In Asia the Nikkei rose 2.7% in response to improving economic news and the recently announced stimulus package. Hong Kong’s Hang Seng fell -1.6%.
We have a very brief Weekly Update this week as we lead into Christmas. However we address an outstanding issue from last week’s update
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Outstanding issue
You may recall in last week’s update that I put a question on notice as to why the US share markets had significantly outperformed the Australian markets since the lows of March 2009. The US S&P 500 had risen 60.6% from its March lows compared to 47.3% for the Australian S&P 200.
We stated last week that there has been short term pressure from money flowing back to the US/USD but this doesn’t explain all of the difference :
‘while this potential for a flow of money to the $US is in place, our markets will remain under pressure. However once the potential or actual flows abate you would expect the Australian markets to move to levels more consistent with the US rises.
However, my view is that the above probably only explains part of the differential although almost certainly the reason for the very recent outperformance of the US/UK over the Australian markets.
The reason for the rest of the difference in market rises ? That is a question I will take on notice.’
After doing some research (in fact it was my son who provided this view), my view for the US markets outperformance of the Australian markets is :
Around 30% of US GDP is made up of exports. As the USD has been very weak (e.g. it is down more than 30% against the AUD in the past year), this fall in the USD goes straight to the bottom line of US company earnings. Putting aside a myriad of other complexities for the moment, then simplistically, US GDP has been given a 9% boost (30% x 30%) merely from the fall in the USD. That is a big number.
If the above is correct, then as the USD rises against the AUD we should see the rises between the Australian and US share markets converge. That is, as the USD rises, earnings will decrease for US exporters and as the AUD falls, earnings will increase for Australian exporters.
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Merry Christmas
2009 is drawing to a close and while it commenced with considerable trepidation and a falling share market, it has ended on a considerably more positive note.
Thank you for your support over the past year and we look forward to continue working with you in achieving your goals.
Our office will be officially closed from Wednesday 23rd December until 11th January, although a small contingent of staff will be in the office over the period we are officially closed.
The directors and staff of Primestock would like to wish you all a merry Christmas and a safe and prosperous New Year.
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