Over the quarter ending 30 September 2014, the MSCI World Index
(ex-Aust) in local currency rose by 0.46%.
MSCI International (ex-Aust)
Index (local currency)
Over the quarter US equities reached new highs, buoyed by
continued earnings growth. Although US growth is on a solid
footing, recent sharemarket gains have eroded the value proposition
somewhat. The cheap money that has helped keep company borrowing
costs low and encouraged investors to abandon the relative safety
of cash and buy shares, will soon fade with the imminent ending of
Quantitative Easing (QE). Nevertheless, while the US is preparing
to end QE, Europe is likely to extend monetary stimulus, which may
provide some support to its sharemarkets despite the relatively
poor fundamentals in that region. Further, while we expect
China's economy to slow in 2015, shares in that country are
already factoring in lower corporate profit outcomes.
Earnings in the United States grew by 11% in the June quarter.
Consensus earnings growth expectations now approximate 9.6% for
CY14 and 14% for CY15. Our fair value estimate for the S&P 500
for CY14 is 1790 and 2043 for CY15. Given that the S&P500 index
is already trading around 1972 points, short term value is not
The outlook for global markets is mixed. Upside to corporate
profitability remains possible in many developed economies given
that output remains well below potential. Yet pervasive structural
imbalances and geopolitical risks continue to impede growth
outcomes. Given that valuations are not overly attractive, the
risk/reward equation is not compelling. Accordingly we recommend
maintaining a modest underweight position.
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.
CIVs will have flow-through status for tax purposes and similar criteria as the MITs, to encourage foreign investment.
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