By Chris Zappone
Update Australian shares and superannuation funds are headed for single-digit returns this financial year, as the recent global jitters take their toll on gains.
Super rating agency SuperRatings said today that the median balanced super fund is on track to post gains of 9.6 per cent, marking the first annual increase for super since the global financial crisis kicked off in 2008.
''With the last seven trading days of the Australian sharemarket showing significant declines, Australia’s major super funds have gone from a hopeful 15 per cent return at the end of April to a still strong, but sub-double digit estimated return of 9.6 per cent for the 2009-10 financial year,'' said SuperRatings managing director Jeff Bresnahan.
The ASX200 benchmark share index ended the financial year with an 8.8 per cent advance. At one point the index rose back above the 5000-point mark before worries about the European sovereign debt crisis and the wider prospects for the global economy pummeled confidence in the past three months.
Balanced super funds typically hold about 60 per cent of their assets in shares, with the remainder in fixed interest, unlisted property, cash and alternative investments. Returns on those assets diverge from stock returns, said Mr Bresnahan.
For example, in the 11 months to May, unlisted property produced returns of 14 per cent.
In the past 24 hours, the downward revision of a leading indicator for growth in China, slumping consumer confidence in the US as well as European debt fears combined to send fears through global markets. Today’s plunges follow recent drops that together have pulled the ASX200 almost 12 per cent lower since the start of 2010.
Despite the fall, the ASX200 has fared better than in 2008-09, when it lost 24 per cent, as the financial crisis climax panicked investors, and 2007-08, when the market lost 17 per cent as the credit crunch first emerged.
Fidelity International head of Australian equities Paul Taylor said the theme of 2010 is for investors to focus on companies whose businesses can grow whether or not the economy overall expands rapidly.
''The focus of 2008 was the balance sheet,'' he said.
''In 2009, it was a cyclical earning recovery.''
In 2010, ''you’re looking for companies that can deliver on their own (and) that are not necessarily dependent on economic growth or whether we go into a double-dip recession.''
Australian shares face a number of risk factors going into the new year, Mr Taylor said, including the possibility of rising interest rates clamping on demand, high household debt levels leading to more deleveraging or stress, and the possibility of home prices flattening or going backward.
The nation, as a small open economy, can also be squeezed by macro-forces beyond its control, he said, with both China and global growth key areas to watch.
''My best guess is that a lot of these key marco factors… are all probably with us for the short term,'' Mr Taylor said.
''But from the investment perspective, that’s often your best opportunity to invest - when everyone is frightened of everything.''
czappone@fairfax.com.au
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