March 2008

Dear Member

Welcome to the March edition of the WA Local Government Superannuation Plan newsletter, brought to you by the team at Western Financial.

In this edition -

1. MARKET COMMENTARY

Following the large falls (of around 10%) in both domestic and international share markets in January, February saw continued volatility but finished with a far more moderate result over the full month albeit ending with slightly negative returns. Due to the further rise in cash rates by the Reserve Bank of Australia (RBA), the $A gained against most major currencies after several flat to negative months. The $A rose by 6.6% against the $US in February and the RBA Trade Weighted Index rose by 5.1%.

The Australian share market was very volatile with daily moves of greater than 1% for more than half the trading days, but eventually finished down by only 0.7% for the month. It recorded -0.8% for the 12 months following returns of more than 23% for each of the previous four years. This continued to reflect global nerves of a possible US recession and general economic slowdown flowing from the credit crunch initially triggered by the US sub-prime problems.

The reporting season has produced several good profit results to date however share prices have retreated due to lower profit expectations going forward. For example Qantas doubled its profit but its share price fell by 5.8% for the month, ASX increased profit by 50% but its shares declined by 9.0% and Woolworths increased profit by 28% but its share price was virtually flat (+0.7%). The weakest sector was Financials excluding Property Trusts (down by 12.5%). This reflected the difficult environment facing the banks, including possible loan write-downs. The strongest sectors were Resources (as reflected by the Materials sector) and Energy which recorded gains of 10.5% and 12.7% respectively. Large companies were weaker than small with the top 50 companies declining by 1.7%, the mid 50 rising by 1.8% and small caps (ex 100) rising by 3.8%.

Major global share markets were negative to flat over February. The MSCI World Index ex Australia was 1.7% lower in local currency terms but down by 5.3% in $A terms due to the stronger $A as mentioned above. The US market was the weakest of the majors with the Dow Jones 3.0% lower and the broader S&P 500 Composite Index down by 3.2%. As measured by the respective MSCI country index in local currency, Japan was down by 1.4%, the UK rose 0.3% and Germany fell 1.2%. Over 12 months, global markets were down by 6.4% in local currency and by 16.6 % in $A terms.

The listed property sector recorded another negative month (-5.6%) and although not as big a fall as in January (-14.3%), investors remain concerned with the ongoing unsettled global climate of sub-prime problems and uncertainties of debt refinancing.The largest company, Westfield, fell only 2.5% while Centro and Mirvac fell 31.8% and 22.3% respectively.

In February, the RBA again lifted the official cash rate (to 7%) due to its continued concerns about inflationary pressures, in contrast to the US central bank which has been dropping rates and providing liquidity due to its concerns about the US economy and financial markets. In Australia, yields of both 90 day bank bills and 10 year government bonds rose to finish the month at 8.0% and 6.2% respectively.

Source: Counterpoint Group Mar 2008

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2. MARKET INDICES

Source: Counterpoint Group March 2008

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3. FUND PERFORMANCE

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INCOME STREAM PERFORMANCE

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4. DEARSON'S DIATRIBE - THE WORLD OF SPORT ACCORDINGTO CHRIS

The Domestic cricket is all over for another year with WA making the 20:20 final but no silverware. Ah, well there is always next year…

The internationals are also over with the Aussies winning the tests but the Indians winning the last 3 way one day competition in a series that was a bit spiteful.

The issue for the future is whether the Aussies are good enough to maintain their world domination OR possibly more relevant is whether they can still psych out the opposition without Warne, McGrath & Gilly - 3 of the best players you will see in generations.

Some of you may have also noted that England tried their hardest to lose the series against the Kiwis but fell over the line in the last test when the Kiwis proved they were the worst team!

Footy:

Its back and the current score is West Coast Eagles 1 win and Fremantle none – there may have been other results but I didn’t notice them. The score is also one knee reconstruction each.

Rugby:

The Western Force are the top of the Aussie teams but slipped to 5th place after the very poor performance against the Stormers.

I have just got back from a week in England where the big story is that Martin Johnson is set to take a role with England but does not want the head coach job that Brian Ashton fills. As Ashton has said he doesn’t want to work with Johnson looking over his shoulder, things are about to get interesting.

England ended up second to Wales in the 6 Nations but that wasn’t considered good enough for the head of the Pommy RFU – a gent by the name of Rob Andrew who used to play with Johnson – getting confused and nasty over there.

Soccer:

Some very unhappy Arsenal supporters at present after the top 4 teams played each other. The end result was Man U leading then Chelski 2nd and 5 points adrift followed by Arsenal and the scousers (Liverpool with Everton just behind them).

All the Arsenal supporters thought they would beat the Russians and hoped Liverpool would beat Man U so they could be even on points – to say it went pear shaped is an understatement!

Liverpool donated their points to Man U by having a player Javier Mascherano sent off for dissent (plus 2 yellow cards). He has since apologized to his teammates and the club but not the referee. Surprise, surprise – he has been charged with improper conduct and faces an extra 2 weeks holiday.

This was after the previous week when Ashley Cole turned his back on a referee and there was a call in the UK papers for players to provide the same respect to referees as in other sports (rugby being cited as an example of no tolerance of player dissent).

Man U played Liverpool the day before the Chelsea Arsenal match and the best line I read in the papers was that after seeing what happened in the Man U Liverpool match, the players at Arsenal and Chelsea only comment to the referee of their match would be to ask how his holidays were and would he like a cup of tea .

I agree it is about time these overpaid prima donnas were brought in line – in Rugby they would have been cooling their heels for months if they talked to refs like they do in soccer!

PS: Spurs won on the weekend and the Hammers lost – made my week.

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