The Australian share market was stronger in April, with the All Ordinaries Index gaining by 1.3% to close at 5,471 points. In the US the Dow Jones Index gained 0.7%, in London the FTSE gained 2.8%, in Hong Kong the Hang Seng Index fell 0.1% and in Japan the Nikkei 225 Index fell 3.5% for the month.
It was an interesting month within the Australian political scene with several fiscal policy revelations ahead of the Federal Budget to be released on 13 May. Rather than speculate what "may" or "may not" be contained in the Federal Budget, I will provide a separate newsletter update summarising the key Budget changes following its release.
A common big picture theme so far this year has been the generally positive news out of the US (and developed nations) offset by a series of disappointing numbers and articles about China. Even our Reserve Bank Governor commented on slowing growth in China in the 1 April decision to keep rates on hold.
Why does China matter? Apart from being the second biggest economy in the world (and moving forward to also becoming a financial powerhouse), it is worth recounting the trade numbers:
From China's perspective, its biggest export destination is the US, followed by Japan. Australia only ranks 12th in terms of China's exports and 6th in terms of imports.
So where is this giant juggernaut of an economy headed? Continuing growth in the US, Europe and Japan will definitely help China's exports. In the short-term, the Government can also easily up its infrastructure spend to ensure that they "dial in" the stated growth target of 7.5%.
The longer-term growth question is more related to how successful China will be in transitioning form "old China" (low value add exporter, with massive infrastructure build-out and urbanisation) to "new China" (growing middle class, appropriate legal systems and more value-add production).
The Reserve Bank of Australia kept the Target Cash Rate on hold in April at 2.50% per annum. The RBA Board meet next Tuesday, with the expectation for remains to remain unchanged. The Australian Dollar was flat in April, with 1 Australian Dollar currently buying 92.85 US cents.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.