The month of June delivered a negative return for those holding Australian Equities, with the All Ordinaries closing the month at 4,324.80 from the prior month’s close of 4453.60. The All Ordinaries delivered a further 2.66% decline in June, against negative 2.67% for the ASX 200, and negative 2.23% for the All Ordinaries Accumulation index, implying 0.43% as an income return for the month (annualised to 5.16% - reflective of the mildly higher than average propensity for ex-dividend dates to fall in June).

Capital raisings were non existent in the period.

 

Channel Seven Group Holdings Ordinary Shares moved lower by 9.61% from month open to close, finishing at $5.74, with a further sell-off evident during the month.

 

The removal of Kevin Rudd, and appointment of Julia Gillard as the new Prime Minister of Australia (24 June 2010) has dramatically changed the political policy landscape, firstly in relation to any additional resources tax , and also in relation to our future population policy (distinctions drawn to date).

 

Our continued approach to asset management remains one of conservative and cautious investment, with a preference for select securities where a valuation gap exists. Always ensuring that asset allocations do not favour Australian Equities beyond the naturally justifiable level for each investor.

 

Our view in relation to equities for 2010 and beyond remains firmly focused on what we can control, namely a resilient tax-effective income yield – and to lock in profits and alpha where appropriate, while aiming to protect capital at all times.

 

Now more than ever, a spread of investments is proving necessary and beneficial, given the propensity for exogenous shocks across economies, sectors and individual businesses alike.

 

The month of June saw positive performing index results enjoyed by Staples (3.18% outperformance), Health Care (3.16% outperformance), Telecommunications (11.46% outperformance), and Utilities (3.70% outperformance). These results were countered by, Financials, Discretionary and Industrials underperforming by 2.08%, 2.25% and 4.46% respectively in the month.

 

The Heads of Agreement between NBN Co. and Telstra (with support of the Government) has proven the major market news for the period, and on a consensus basis, has served as a boon for Telstra’s future prospects.

 

At an index level of 4,324.80 and with 2010 calendar capital growth expectations now at 0% for the year to 31 December 2010 (revised below our initial range), this implies a new anticipated index level of 4,880.20 at the end of the calendar year, and a positive return from the present level to holders of 12.84%, with 6 months left to capture (2.14% p/m). 

 

China – are there any surprises? How will they further their national interest through use of their growing Sovereign Wealth. 

 

Minerals Resources Rent Tax – is this acceptable? Does this resolve the uncertainty, and remove the Sovereign Risk Premium that some believe is now attributable to an investment in Australian Equities.

 

A European Resolution – will structural issues be addressed, can growth and austerity coexist? When will sustainable growth be achieved?

 

Listed Property Trusts – will the recovery story continue?

 

Liquidity and leverage – will liquidity of investment assets sustain, or will long-term liquidity be jeopardised by mandated selling, and unwinding of excessive asset positions funded by unwise loans the world over (Investment Banking exposures most notably).

 

Capital Raisings and Volumes – will big companies come back to the capital raising tap for more equity, and what depressive effect (if any) will this have on prices across the board.

 

Risk aversion – how much new ‘fear’ can enter the market without substantial new information shifting the playing field?

 

How much further does the mining boom have left to run – when will Coal and Iron Ore self-correct (if they do)?

 

Will equity investments regain favour? Can confidence return to prior levels, and what additional catalysts may drive an about-face on sentiment, and risk-tolerance?

 

Interest Rates: To what extent will our growth and inflation be constrained from the natural course? How blunt will this instrument prove to be on housing sector and discretionary spending?

 

Australian Dollar – where is this headed, short, mid and long term?

 

We continue to monitor and reassess each of these unanswered questions that we believe will

guide the market’s fate over the coming year ahead.