Stronger dollar lifts returns in May

The strengthening Australian dollar, up 4.5 per cent for May, is attracting investment in Australia and is working to the benefit of both the local equity and property markets, pushing investment returns higher for the month, according to figures byAusbil Dexia.

The best performers were indexed bonds and listed property trusts (LPTs), which returned 3.3 per cent and 5.0 per cent (based on the S&P/ASX 200 Index) respectively.

Heightened corporate activity in the LPT sector centring around AMP property trust assets contributed to its strong performance for the month, and generated a 15.5 per cent return for the year to date.

All asset classes were in positive territory for May, with international bonds returning 2.1 per cent, Australian bonds 1.6 per cent, international equities 1.5 per cent, direct property 0.8 per cent, and Australian equities and cash both returning 0.4 per cent.

While most superannuation funds will still produce negative returns for the full financial year, May performances are expected to boost the average balanced fund by 1.2 per cent for the month.

On the results, Ausbil Dexia chief economist and balanced funds manager John Honan says, “Australian assets are in demand and capital is flowing into the economy and the currency has notably appreciated.”

“The inflow of capital is also holding up the domestic bond market, although seemingly with little regard for where bonds might be headed in the longer term,” he says.

On the international front, the US, Asian and European markets had all posted significant gains, showing growing confidence and strengthening despite the negative influences of SARS and terrorism, according to Honan.