Page 6 - PSK Q2_2022_Thomas Ilinkovski
P. 6
threat of recession also resulted in Real 2020, whilst the tech heavy Nasdaq slid (-
Estate (-17.8%) and Consumer 22.4%) - its worst quarterly stretch since
Discretionary (14.9%) falling sharply. 2008: both in US dollar terms. In AUD
terms, falls respectively of (-8.5%) and (-
The advantages of Value orientated 15.1%), currency movement proved to be a
companies in rising rate environments
didn’t quite come to fruition (broadly) strong attributor for unhedged strategies as
during the quarter (relatively outperformed the Aussie dollar fell sharply during the
quarter.
Growth though) as all style factors were
punished whilst the whole market cap In Australian dollar terms, the broader
spectrum – from large (-10.6%), mid (- global equity market (MSCI World NR
14.7%) and small (-20.4%) – also sold-off AUD) lost (-8.5%); Eurozone equities
as heightening volatility and “risk-off” (STOXX Europe 600 NR), continues to
mentality gripped investors. experience steep declines as the war in
International equities Ukraine continues and concerns mounting
over potential gas shortages and recession
Global equity markets continued to weaken fell (-7.2%); Emerging Markets (MSCI EM
over the June quarter experiencing the Index) however held up relatively well (-
same vicious selling pressures as the 3.3%), mainly due to China, the FTSE
domestic market. The first six months can China 50 USD TR shot up (+12.9%), as
best be characterised by the fastest rate- lockdowns were eased, economic
hiking cycle in decades - to combat levels indicators and manufacturing metrics
of inflation not seen this century - picked up, the People's Bank of China
continuing market turbulence and a war (PBOC) kept its key monetary policy rates
that could be drawn for longer than most steady and President Xi reaffirming
people expected, that has spurred massive stimulus packages for the H2.
spiralling inflation and leaving investors ASEAN fared much better relative to Latin
wounded and to contemplate what’s America, which continue to be dragged
installed for the remainder of the year and down by sovereign uncertainty, trade and
beyond. What is arguably the key is that currency depreciation (especially in Brazil).
central bank policy will play a large role in US dollar strength continues to be the
the potential outcomes of the global broader EM headwind.
markets (and economies) in H2.
Property & Infrastructure
Quarterly performance across regions The Australian listed property sector
suffered significant losses as hawkish (S&P/ASX 200 A-REIT) continues its
central banks implemented aggressive
tightening policies hell-bent on stifling horror run to the year falling a further (-
17.7%) to be down (-23.5%) for the six-
inflation at the cost of economic growth. As
prices continued to be exorbitant (based on month period. This is largely due to the
a never-ending zero-rate environment), ongoing rise in ‘real’ yields and the rising
risk of recession.
and earnings expectations hence not being
adjusted for the rising the risk of inflation, Global listed property (unhedged) returned
US markets continued on the merry way (-9.4%), for the quarter, (-15.4%) year to
(US PE ratio, based on forward earnings, data, considerably outperforming the
measured circa 22 times at the beginning domestic market. The speed and level of
of the year) until reality bit hard seeing increase in real interest rates over the
historical weekly losses in mid-June. By quarter has de-rated listed REITs globally
June end, after two hefty rate increases by (especially in the US) while the sector also
the Fed, the second of 0.75% being the continues to be weighed down by issues
largest since 1994 and bringing the Feds surrounding the China property sector.
cash rate to a range of 1.5%-1.75%, this The good news is that most REITS are
ratio had dropped to 16.5 times by the end now trading below the net asset values
of June with many tipping the rot has not which will possibly provide positive trading
ended. The S&P 500 lost (-16.4%) - its opportunities for the remainder of the year.
worst quarter since the March quarter of
