Four charts that show it's been a quarter to forget for Aussie investors
Investors in Australia may be happy to see the end of a quarter that has been far from kind to many as the local economy strives hard to resist falling into recession, something it hasn't experienced for 2 1/2 decades.
Aussie shares are dishing out some of the worst returns in the developed world in the June quarter as banks, hammered by the new government levies and a credit rating downgrade, decline along with energy shares.
Citigroup and the quantitative analysts at Morgan Stanley led a chorus of bears recommending to avoid most of the local stocks.
The Aussie struggled with the second-weakest performance among major currencies as political gridlock and signs of lukewarm consumer spending overshadowed a slew of positive data surprises for the economy, including the best jobs growth since 2004.
As the chart shows, Australian shares are being trounced by their counterparts in New Zealand.
The S&P/ASX 200 Index slid about 1 per cent since the end of March to unwind some of its previous four-quarter surge. Among 24 major stock markets, only Canada ranks worse.
That came as iron ore plunged 22 per cent in the quarter through to June 28, putting it on track for its worst drop in more than two years and helping to bring out the pessimists.
As a result, traders have boosted bearish bets on Aussie stocks, sending the number of S&P/ASX 200 Index put options outstanding [contracts to sell shares at an agreed price at a particular date] to a two-year high relative to calls.
Meanwhile leveraged funds are betting on falls in the Aussie dollar for only the second time in the past year.
That government bonds were left ruling the roost may owe much to the continuing international demand for the world's highest yielding AAA sovereign paper.
Demand rose in the most recent government bond auctions for the respective maturities and research from the federal funding arm showed that investors are even more eager for Aussie notes than they are for US Treasuries, on one measure at least.
The term premium -- a gauge of the extra compensation investors demand to own the benchmark maturity instead of rolling over a series of shorter-dated obligations -- has been below zero on 10-year government debt in Australia for more than two years, research released last week by the Australian Office for Financial Management shows.
It has also been lower than the term premium on similar-maturity US debt, and the researchers said the drop for Australia has likely been driven because large-scale asset purchases carried out by major central banks fuelled appetite for higher-yielding government debt.
Bloomberg
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