Australian stocks rose in July as part of a broader global equities rally. The S&P/ASX 300 Index rallied +6.0% as markets pared back expectations for sharp rate rises on the back of slowing growth and falling bond yields. The improvement in investor sentiment was also seen in bond markets, as the Australian 10-year yield lowered by 60bps to 3.06%. From a sector standpoint, IT was the best performer with falling bond yields providing a valuation tailwind – in contrast to the first half of 2022. Lower bond yields also supported real estate, led by REIT managers CHC and GMG. Metals & Mining was the worst performer, driven by a decline in commodity prices and negative sentiment towards China exposed assets.
The State Street Australian Equity Fund underperformed the S&P/ASX 300 Index during July.1 The portfolio’s preference for lower risk, defensive names was a major detractor as investors favoured cyclical growth during the month. Sector wise, negative stock selection within Staples (Elders and Graincorp) and our underweight to Financials (big 4 banks and Macquarie) were key detractors from relative performance. On the other hand, our underweight to Metals & Mining and good stock picking within Energy (New Hope) were key contributors.
During the month of July, we increased our position in energy infrastructure business APA Group on the back of improving Sentiment and Quality scores. APA offers a diversified and defensive stream of earnings, alongside a robust balance sheet. In recent months, we have also observed a marked improvement in APA’s sales and earnings expectations relative to peers. On the other side of the ledger, we reduced our position in JB Hi-Fi and Harvey Norman, as multiple Sentiment signals have begun deteriorating.
1Source: SSGA as of 31 July 2022. 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.
For Institutional / Professional Investors use only.
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.
This material should not be considered a solicitation to apply for interests in the Funds and investors should obtain independent financial and other professional advice before making investment decisions. There is no representation or warranty as to the currency or accuracy of, nor liability for, decisions based on such information.
All information is from SSGA unless otherwise noted and has been obtained from sources believed to be reliable, but its accuracy is not guaranteed.
This information should not be considered a recommendation to buy or sell any security or sector shown. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. It is not known whether the securities or sectors shown will be profitable in the future. Characteristics are as of the date indicated, subject to change, and should not be relied upon as current thereafter.
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.
Investing involves risk including the risk of loss of principal.
Diversification does not ensure a profit or guarantee against loss.
Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions.
This communication is directed at institutional and wholesale clients only. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) are not entitled to rely on this communication.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA Australia’s express written consent.
© 2022 State Street Corporation - All Rights Reserved.
Adtrax Code: 4889254.1.1.ANZ.INST
Expiry: 31 August 2023