Transcript 31 August 2008

BT Monthly Markets
Chart Pack – August 2008
An overview of movements in global financial markets
Global share markets mixed in August...
 Global share markets posted mixed returns in August
as a number of large US financial institutions announced
further write-downs related to the global ‘credit crunch’,
sending banking and other financial stocks lower and
offsetting another big fall in oil prices.
 The Australian share market ended its run of two
successive monthly falls in August, with the S&P/ASX 200
Accumulation Index returning a strong +4.1% thanks mainly
to rising expectations of interest rate cuts by the RBA. The
Australian market is now down 21.9% since its record highs
back in November last year and remains 16.5% lower so far
in 2008.
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…but continue to perform well over the long-term,
despite some major market events
Impact of major market events on global shares since 1986
6,200
Jul 01
Tech Wreck
5,700
5,200
4,700
3,700
3,200
Nov 89
Fall of the
Berlin Wall
2,700
2,200
1,700
Sep 01
Attack on
Twin Towers
Jul 98
Russian Bond
Crisis
4,200
Oct 87
Wall Street
crash
Jun 07
US Sub-prime
Crisis
Aug 97
Asian Currency
Crisis
Feb 94
Bond Market Crash
Jan 91
Gulf War
Mar 03
Troops enter
Iraq
1,200
700
Aug-86
Aug-88 Aug-90 Aug-92 Aug-94 Aug-96
Aug-98 Aug-00 Aug-02 Aug-04 Aug-06
Global shares measured by the MSCI World ex-Australia (net dividends) Index in A$.
Source: BT Financial Group, MSCI
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Aug-08
The Australian share market closed August 4.1%
higher
S&P/ASX 200 Accumulation Index – 2008
41,000
40,000
39,000
38,000
37,000
36,000
35,000
34,000
33,000
32,000
31,000
31/12/2007
29/02/2008
Source: BT Financial Group, Premium Data
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30/04/2008
30/06/2008
31/08/2008
Key Australian economic news – August
 The Reserve Bank of Australia (RBA) cut interest rates for the first time in over
six years at its early September board meeting, taking the official cash rate
from 7.25% to 7.00%. If the Australian economy continues to slow as expected,
then we may yet see further rate cuts by the end of this year.
 The Australian economy added 53,700 new jobs in July after a gain of 19,700
in the previous month. The unemployment rate was unchanged at 4.3%.
 The Westpac/Melbourne Institute’s consumer sentiment survey rebounded in
August to be 9.1% higher for the month. However, sentiment remains down
22.4% on this time last year.
 Australia’s current account deficit was $1.1 billion wider than the market had
expected in the June quarter, coming in at $12.8 billion. It was, however,
significantly lower than the $19.8 billion recorded in the March quarter.
Source: BT Financial Group
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The Australian dollar fell again in August
 The Australian dollar (A$) continued its slide against the US dollar in August
amid expectations of more interest rate cuts by the Reserve Bank. However,
with commodity prices expected to stay relatively high over the long-term, the
trend in the A$ is likely to remain up.
 At the end of August:
A$1 bought
Source: BT Financial Group
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US$0.8580
-8.9%
€0.5851
-3.1%
¥93.34
-8.1%
The Australian dollar versus the US dollar…
Currency markets – A$ per US dollar
1.0000
0.9500
0.9000
0.8500
0.8000
0.7500
0.7000
0.6500
0.6000
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Source: BT Financial Group. Figures at 31 August 2008.
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Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
the Euro…
Currency markets – A$ per Euro
0.6500
0.6400
0.6300
0.6200
0.6100
0.6000
0.5900
0.5800
0.5700
0.5600
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Source: BT Financial Group. Figures at 31 August 2008.
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Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
and the Yen
Currency markets – A$ per Yen
110
105
100
95
90
85
80
75
70
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Source: BT Financial Group. Figures at 31 August 2008.
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Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Official world interest rate movements – August
 In Australia, the Reserve Bank cut the official cash rate by 0.25% (to 7.00%),
the Bank’s first rate cut in over six years. Elsewhere, the European Central
Bank, the Bank of England, the Bank of Japan and the US Federal Reserve
all left their rates on hold.
Current rate
Last moved
Australia
7.00%
Aug 2008
US
2.00%
Apr 2008
Europe (ECB)
4.25%
Jul 2008
Japan
0.50%
Feb 2007
United Kingdom
5.00%
Apr 2008
Source: BT Financial Group
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Direction of
last move
Global share market returns
31 August 2008
1 year
3 years (pa)
5 years (pa)
S&P 500 Index (US)
-12.97%
1.68%
4.94%
Nasdaq (US Tech.)
-8.81%
3.23%
5.51%
Nikkei 225 (Japan)
-21.10%
1.74%
4.79%
Hang Seng (Hong Kong)
-11.35%
12.57%
14.28%
DAX (Germany)
-15.92%
9.97%
13.01%
CAC (France)
-20.84%
0.63%
6.24%
FTSE 100 (UK)
-10.58%
2.09%
6.26%
S&P/ASX 200 Accum. Ind.
-14.24%
9.43%
14.69%
S&P/ASX Small Ordinaries
-19.43%
8.65%
14.89%
S&P/ASX 300 Listed Prop.
-36.69%
-2.26%
6.47%
Global
Australia
Source: BT Financial Group
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Short-term asset class performance
1-year rolling returns to 31 August 2008 (%)
2008
2007
2006
2005
2004
2003
2002
2001
Best performing
asset class for the
year
2000
1999
1998
1997
1996
1995
1994
1993
Australian
cash
7.64
6.48
5.81
5.67
5.44
4.90
4.65
5.91
5.78
5.01
5.05
6.36
7.78
7.50
4.96
5.77
Australian
bonds
6.95
4.39
3.27
7.19
5.16
6.58
5.17
10.44
5.82
4.65
7.01
14.28
12.57
11.66
-2.23
17.99
Australian
property
-36.69
21.93
20.94
17.91
24.29
10.88
9.94
16.25
9.38
10.86
14.18
18.82
10.74
9.11
-5.97
31.11
Australian
shares
-14.51
27.34
20.33
30.11
16.09
7.29
-1.20
2.85
19.16
22.80
-0.44
19.31
9.62
5.46
9.02
31.24
International
bonds
3.73
-0.70
-1.08
0.13
2.19
-6.85
5.10
16.09
7.84
-6.42
38.87
8.46
0.95
12.96
-7.36
15.46
International
shares
-16.99
9.39
13.73
10.61
5.81
-5.79
-21.21
-18.28
24.88
19.52
33.60
32.07
7.17
6.86
-2.01
28.72
Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property
Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$
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Short-term asset class performance (cont’d)
1-year returns to 31 August 2008 (%)
31 August 2007
31 August 2008
4.4
7.0
Australian bonds
Listed property
21.9
-36.7
Australian shares
27.3
-14.5
-0.7
Global bonds
Global shares
3.7
9.4
-17.0
Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property
Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$
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Long-term asset class performance
31 August 2008
$24,000
$22,500
$21,000
$19,500
$18,000
$16,500
$15,000
$13,500
$12,000
$10,500
$9,000
$7,500
$6,000
$4,500
$3,000
$1,500
$0
Australian shares
Listed property
Global shares
Australian bonds
Cash
84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Note: Accumulated returns based on $1,000 invested in December 1984
Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property
Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$
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Oil prices continued to fall in August on the back of a
slowing global economy and a stronger US dollar
Oil prices – US$ per barrel
$150
$135
$120
$105
$90
$75
$60
$45
$30
$15
$0
88
89
90
91
92
93
94
95
96
97
98
99
00
01
Source: BT Financial Group. West Texas Intermediate oil price at 31 August 2008.
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02
03
04
05
06
07
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Summary

The underlying strength of the Australian economy, relative to its global
counterparts, looks set to continue in the near-term, though admittedly we are
now beginning to feel the knock-on effects of the slowdown that’s impacted
countries like the US and the UK.

The RBA’s decision to lower the official cash rate should help to bring inflation
under control, though at the moment it continues to sit well outside the Bank’s
2-3% comfort zone. If our economy continues to slow as expected, then
there’s a good chance we’ll see another rate cut in the coming months.

The Australian dollar (A$) looks set to remain at high levels over the long-term,
supported mainly by still high commodity prices. However, if interest rates here
do fall further, then the A$ will lose some ground against the US dollar.

Gains in global share markets, including here in Australia, are likely to remain
under pressure in the near-term, particularly as global growth continues to
slow down.
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