International equities drag down returns

A rising Australian dollar plus uncertainty in the US have severely damaged international equities for the month of November.

The slump in international shares tainted an otherwise solid performance from all other asset classes, according to the latest figures released by Ausbil Dexia.

International equities suffered a fall of 7.5 per cent, which Ausbil attributes to a negative perception of the US stock market, while most Asian and European markets followed the negative trend.

In the US, the Nasdaq plunged a staggering 23 per cent, the S&P fell eight per cent, and the Dow lost ground at five per cent. The Nasdaq was reduced to 2598 points at the end of November which is just over half of its peak 5133 reached in March.

In other international markets, the UK suffered a 4.6 per cent drop, while the French and German markets experienced heavier casualties of 8.9 and 10 per cent respectively. Asian markets made similar losses, except for Thailand which posted a 2.2 per cent growth, and Japan, which was steady with growth of 0.7 per cent.

The slump in international markets wasn't helped by a strengthening Australian dollar. In November it rose against the $US by 1.7 per cent. And since the end of November, it has strengthened a further 2.7 per cent, which may have a similar bearing on the international equities results for December.

Ausbil Dexia chief investment officer Michael Wilson says the US markets are mostly to blame for the overall poor performance of international equities, and believes that the Nasdaq has been oversold. He is, however, upbeat about a recovery occurring soon.

"November was not a good month. Since the end of the month, however, markets have taken on a more positive tone suggesting the possibility of a recovery of some sort during December and early January," he says.

Of the other asset classes, listed property trusts performed best with 2.2 per cent growth, followed by Australian bonds (2.0 per cent), international bonds (1.7 per cent), Australian equities (1.2 per cent), indexed bonds (1.2 per cent), with direct property and cash posting returns of less than 1 per cent.