In line with global equities, Australian equities rallied in January off the back of stabilizing recessionary expectations and easing rate hike fears after a soft US Gross Domestic Product (GDP) print. In a ‘risk-on’ month, investors are now pricing in significant probabilities of a soft landing in 2023 – supported by the rapid re-opening of China and lower gas prices in Europe. From a sector perspective, Discretionary was the best performer, as positive pre-announcements from cyclical retailers suggested that headwinds from the Reserve Bank of Australia (RBA) rate hikes have yet to bite consumers. Materials, Real Estate and IT also performed well. Utilities was the key laggard, due largely to concerns about government intervention, falling power prices and the general risk-on sentiment in markets.
The State Street Australian Equity Fund underperformed the S&P/ASX 300 Index during January.1 Sector wise, negative stock selection within Communication Services (Spark NZ, Telstra and Chorus) and Materials ex Metals & Mining (Amcor) were the biggest detractors from relative performance. Conversely, good stock picking within Financials (not holding Westpac) contributed positively towards relative returns during the month.
During the month of January, we marginally increased our holdings of BHP which was funded by trimming our weight in telecommunication infrastructure company Chorus. Our buying of BHP was driven largely by improvements in Sentiment and overall momentum scores in recent months on the back of China’s re-opening. BHP has also benefited from an upward trend in its Quality scores, and is trading at valuations that are more or less in line with its peers.
1Source: SSGA as of 31 January 2023. Past performance is not a reliable indicator of future performance. Performance returns for periods of less than one year are not annualized. The performance figures contained herein reflect Total Returns and are provided on a net of fees basis. Performance figures are calculated using end-of-month exit prices and assume the reinvestment of distributions and make no allowance for tax. Net performance figures are after management and transaction costs. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income as applicable.
Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) (“SSGA, ASL”). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: +612 9240-7600 · Web: www.ssga.com. State Street Global Advisors, Australia, Limited (AFSL Number 238276, ABN 42 003 914 225) (“SSGA Australia”) is the Investment Manager.
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References to the State Street Australian Equity Fund ("the Fund") in this communication are references to the managed investment schemes domiciled in Australia, promoted by SSGA Australia, in respect of which SSGA, ASL is the Responsible Entity. This general information has been prepared without taking into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure document and target market determination, available at www.ssga.com, before deciding whether to acquire or continue to hold units in the Funds.
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Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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