Over the quarter ending 31 March 2012, the MSCI World (ex-Aust)
Index USD$ rose by 11.08%.
In our last update we wrote:
"Until a more comprehensive solution for the Eurozone
problems is found we expect global markets to remain directionless.
With Europe on the verge of a recession and the prospect of China
slowing, it is very difficult to mount a bullish case for global
equities despite reasonably attractive valuations."
The rally on global sharemarkets over the quarter shows how
wrong we were. What we did not count on was the success of the
ECB's Long Term Refinancing Operation (LTRO) where banks were
offered cheap loans for 3 years. As stated earlier, the 3 year LTRO
had the dual effect of reducing the short term risk of any EZ bank
failures and also reducing sovereign bond yields and thus reducing
the near term risk of a country default. LTRO's are nothing new
– the reason this initiative worked was because of the
longevity of the loan term, allowing banks to plan with greater
certainty over a much longer time frame than normal (previous LTRO
terms were only for 3 or 6 months).
Make no mistake – investors greatest fear had been an
escalation of the sovereign debt crisis. The 3 year LTRO initiative
almost single handedly eased those fears by more than we ever
The recent rally on global sharemarkets has been largely a relief
rally as economic fundamentals otherwise remain mixed. The US
recovery has very much justified a rally but it faces headwinds in
the form of looming fiscal austerity to reduce the Government's
enormous debt burden. China's economy has slowed well below
trend and the Eurozone remains in or on the borderline of a
The 3 year LTRO was no magic bullet but it has bought policymakers
more time to try and address the fundamental problems that affect
the EZ region. Given the enormity of the EZ problems, we remain
sceptical of any significant success – this is because
the measures required of debt reduction, structural reforms and
growth are almost diametrically opposed. Fiscal austerity required
to reduce debt does not go hand in hand with growth
In the short term we expect momentum to spur global markets
higher, but without a solid economic footing a sustainable rally
remains unlikely. As a result we recommend a moderate underweight
exposure to this asset class over the coming quarter. In the short
term we expect momentum to spur global markets higher, but without
a solid economic footing a sustainable rally remains unlikely. As a
result we recommend a moderate underweight exposure to this asset
class over the coming quarter.
An actuarial review of the Invensys Australia Superannuation Fund showed it to be in surplus to the tune of $189.2 million. In mid 2003, the Invensys Group proposed to the trustee that the surplus be repatriated to the principal employer in the group.
Lenders in New South Wales breathed a sigh of relief earlier this month when the Supreme Court ruled in Bank of Western Australia Ltd v. Primanzon  NSWSC 862 that two part-time commercial property investors could not claim relief under the Contracts Review Act 1980 (NSW) because the loans advanced to them were entered into in the course of a trade, business or profession carried on by them.
A key aspect of an innovation culture is keeping it active at all levels of management, from teams to board meetings.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).