Market Update - December 2013

The majority of markets in December pushed higher with the MSCI World Index in Australian dollar terms rising 3.9%.

The big news of the month was the Federal Reserve announcing a reduction in the amount of US bonds and treasuries which they will purchase each month going forward.  The timing of the reduction had been heavily debated around financial markets for months and the announcement came after more strong employment, manufacturing and GDP figures.  This helped lift the weight from the markets shoulders and the S&P 500 Index (+2.2%) and US dollar (+0.8%) were able to push higher.

The Chinese equity market fell 4.7% after the 7-day interbank funding rates saw a sudden spike, with funding rates moving from 4.5% to 9% in the space of a week.  The rates have since normalised with the People’s Bank of China injecting liquidity into the system to ease the stranglehold that tight money can have on the economy.

Japan continued to gain the attention of the global investor community as the faith in the Japanese government’s attempt to double the monetary base to revitalise inflation continues to gain momentum. The equity market rose 3.5% in local currency terms with the Yen falling 2.2%.

2013 was a good year for the Funds’ returns and our approach of buying neglected companies came to the fore.  With widespread caution still prevailing, a cyclical and growth bias was rewarded.

Liquidity still dominates markets for now and in the latest quarterly report, Kerr Neilson sets out his views on ‘tapering’,  the potential of deflation, and examines Bitcoin; an interesting sign of the times and perhaps a reflection of the forces also igniting art and high-end property.

The markets have become less correlated, which is helpful for stock-pickers, and there has been some rotation in portfolios recently, albeit our core structural themes remain consistent.  While the US economic recovery is in full swing, it has also been the greatest market beneficiary.  As such, Jacob Mitchell, Andrew Clifford and Clay Smolinski’s comments on the opportunities in Japan, Asia and Europe are relevant, with reform agendas at the forefront, particularly in India, China and Japan.  In our sector funds,  Bianca Ogden points out that we expect the froth in US biotechs to highlight better value elsewhere in healthcare; Alex Barbi continues to find ideas relating to 4G and smartphone proliferation; while Simon Trevett is revisiting luxury goods.

The Platinum Trust December 2013 Quarterly Report is now available on our website here.

DISCLAIMER: The above information is commentary only (i.e. our general thoughts). It is not intended to be, nor should it be construed as, investment advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Before making any investment decision you need to consider (with your financial adviser) your particular investment needs, objectives and circumstances. The above material may not be reproduced, in whole or in part, without the prior written consent of Platinum Investment Management Limited.