Skip to main content
Active Quantitative Equity (AQE)

Fund Update – January 2023

2 min read

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.

Attribution:

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.

Notable changes 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.