Dec 2007

Dear Member

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

Best wishes for the festive season from the team here at Western Financial.

In this edition -

1. MARKET COMMENTARY

Listed below is the investment commentary for November 2007 from the Fund’s asset consultant, the Counterpoint Group.

November saw all major listed markets (equities and listed property) record negative returns. Investors are becoming increasingly nervous about the sub-prime led problems in the US flowing through to an economic slowdown or worse. Due to the fall in the Australian dollar (4.6% fall in the Trade Weighted Index and against the US dollar), overseas shares showed a small positive for the month in Australian dollar terms.

The Australian share market again reached a new record high (at the beginning of November). After a volatile month influenced by an interest rate rise, a federal election and change of government in Australia, and continued problems in global credit markets, the market recovered late in the month to be down by only 2.9%. Activity in the resources sector (-1.2%) moderated the fall, with BHP Billiton’s proposed takeover of Rio Tinto (+32%) and the discovery of iron ore reserves by Fortescue Metals (+13%). Consumer Staples (+2.4%) was the strongest major sector while Financials (-4.3%) was the weakest. Concerns about the flow on effects of the sub-prime difficulties are clearly affecting investor sentiments in the finance and banking sector.

Overseas share markets were also weak during November. The leading measure of global share performance, the MSCI World ex Australia Index recorded -4.3% in local currency terms or 0.6% in Australian dollar terms due to the weaker Australian dollar. In the US the S&P500 fell 4.2% while earnings of companies in that index were 2.5% lower than in the equivalent period for the previous year. European markets were also down over the month but generally by less than the US market, while the UK market fell by 4.7%. Financial institutions globally tended to be adversely affected by the prevailing credit market conditions. Chinese economic data continues to indicate solid growth while the Eurozone growth of 0.7% for the September quarter indicates a modest slowdown. As stated, the Australian dollar was weaker against all major currencies. Apart from the 4.6% fall against the US dollar it also fell by 8.2% and 5.9% against the Yen and Euro respectively.

The listed property sector produced a very weak monthly performance with the ASX300 Property Trust Index declining by 6.4%, underperforming the broader equity market for the third consecutive month. This has resulted in a significant reduction in the 12 month performance, being 5.2% to November 2007 compared to 31.7% for the previous 12 months to November 2006. This market correction has been a reaction both to the very strong listed property markets of recent years and to the concerns relating to global credit markets. The yield from the sector is currently the same as for the 10-year government bond rate of around 6%.

The Reserve Bank of Australia raised its cash rate target by 0.25% to 6.75% at its meeting on 7 November. This follows reductions in rates by the US Federal Reserve of a total of 0.75% in September and October, indicating the continuation of different concerns by the two central banks of a still strong economy in Australia leading to possible inflation and a weakening in the US economy leading to a possible recession. Credit markets are still reflecting concerns about the possible flow-on effects of the sub-prime problems.

Source: Counterpoint Group Dec 2007

Back to top

2. MARKET INDICES

Source: Counterpoint Group Nov 2007

Back to top

3. PLAN PERFORMANCE - EARNINGS TO 30 NOVEMBER 2007 - Please note from next month these investment options will be reported using the new descriptions which came into effect on 1 December.

Printer friendly version (PDF)

Individual Monthly rates (PDF)

PENSION ACCOUNTS PERFORMANCE TO 30 NOVEMBER 2007 - Please note from next month these investment options will be reported using the new descriptions which came into effect on 1 December.

Printer friendly version (PDF)

Individual Monthly rates (PDF)

Back to top

4. DEARSON'S DIATRIBE - THE WORLD OF SPORT ACCORDING TO CHRIS (BACK BY POPULAR DEMAND)

In cricket, the Aussies have got back the one day trophy from the Kiwis after a 2-0 win to revenge the 3-0 loss last year in NZ. Except for the 20:20 world cup, that is every possible trophy they can win back in their display case. The next target for them is the Indians starting on Boxing Day and if they win the first 2 tests, they are on target to beat their record for consecutive test wins at the WACA test.

Not on such a high are the Western Warriors who have just lost their 4th 1 Day Match in a row - a new record! Meanwhile the Poms are as usual getting thrashed in Sri Lanka. They were all out for 81 yesterday but there is some good news - that is not their worst result. In fact the Poms have 17 times scored less than 81 - so they must be improving!

Another recent low was the Western Force changing sports from rugby to Quokka Soccer - hopefully they improve their off field antics and focus on the Super 14 which is only a couple of months away now.

Robbie Deans is the first non Aussie to be coach for the Wallabies. The ex Crusader coach (after the next season - ed) will be a great asset for the Aussies and hopefully put a bit of backbone into the team.

On a sad note, the Australian Rugby Championships has been dumped due to the higher than expected losses in the first (and now last) season. The demise of this competition is a bit short sighted, as it was a chance for fringe players to get some good experience. In Europe, most players get over 25 high level games a year - here it is now just 15 via the Super 16 comp.

On the Footy, the draft is over, the Roos are staying in Melbourne and no player has been arrested for weeks.

On the soccer, my team Spurs have doubled the number of wins in the last fortnight - they now have 4 - not bad from 17 games. Sometimes fill in sports commentator David Wisher’s team West Ham are now only one place above us, but by 4 points and a game in hand - we will catch them (eventually). ManU & Arsenal are battling it out at the top with the next 3 now a minimum of 5 points behind.

The next few weeks will probably see a lot of changes in the ladder – they play 4 games in about 10 days over the holiday period.

This is the last sports update for 2007 - we will be back in 2008.

For now, on behalf of the Member Services Team, may I wish you all a safe and happy Christmas and New Year with plenty of sport and sunshine.

That’s all for now folks

Back to top