The All Ordinaries Index fell 2.9% to close the month at 4,369.9 points, marking the fourth negative month in a row. Whilst August was another poor month, in a relative sense, the Australian sharemarket was somewhat insulated from the large falls experienced overseas.
Global sharemarkets were all significantly weaker in August with the Dow Jones Index falling 4.4%, the FTSE falling 7.2%, the Nikkei 225 falling 8.9% and the Hang Seng falling 8.5%.
The global economy is continuing to experience several headwinds including concerns over sovereign debt in the United States and Europe. Domestically, the strength of the Australian dollar, a frugal consumer and the uncertainty around the direction of interest rates has impacted market sentiment.
The sharemarket may have overreacted to recent events with investors jumping back into the market to support stocks from month lows. During August, the Australian sharemarket recovered over 7.7% in the last two weeks of the month.
Whilst on a value perspective shares look very attractive to long-term investors, the sovereign debt and U.S. economic issues will remain a feature of the global economy for the foreseeable future. These issues will no doubt mean that volatility will continue to be present.
The Reserve Bank of Australia left interest rates on hold in August and will meet next Tuesday to asses interest rates. Most commentators are now predicting the next move to be a rate cut.
The Australian dollar fell during the month, although it is still strong from a historical perspective and is currently buying US107.32 cents to 1 Australian dollar.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.