Bull in a China Shop | BetaShares

Bull in a China Shop

BY David Bassanese | 3 April 2018
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Week in Review

Global markets tried to recover ground last week with reports that US President Trump was keen to strike a trade deal with China sometime soon.  That helped global stocks rise strongly last Monday, though the lack of a confirming official announcement and continued worries about the tech sector saw markets ease back over the rest of the week.  All up, the S&P 500 closed last week up 1.9%, though it was not enough to save our S&P/ASX 200 Index from shedding 1.1% for the week.   Of course, the big news came over the weekend, with China announcing its own range of retaliatory tariff measures, which saw US stocks slump on the first day of this week.

Closer to home, a further drop in iron-ore prices was a notable development, in what was otherwise a very light week in terms of economic data.  Weaker commodity prices and narrowing interest-rate differentials with the US have both helped push the $A down further in recent weeks.  The $A has been trending down since it peaked on Australia day at US81c.

Week Ahead

Globally, the focus is likely to remain on the US-China trade tensions.  The great hope is that the two sides could announce they’re preparing to sit down and talk.  Markets will also take note of the US payrolls report on Friday and will be especially keen to see another relatively benign average earnings number – after the shock two month ago.  The market is expecting a 0.2% gain in average earnings, which would see the annual growth rate inch up to 2.7% from 2.6% – still low enough not to cause concerns.

In Australia, the RBA policy meeting is likely to be another non-event, with rates left on hold.  Building approvals and retail trade will be released on Wednesday, which are respectively likely to show housing construction continuing to slowly come off the boil and still relatively patchy consumer spending.

Have a Great Week!

2 Comments

  1. Raimond Bazbauers  |  April 4, 2018

    Hi, I originally bought 1,230 HVST on 06/10/16. After DRP my holding is now 1,425. Unfortunately my investment has gone down by 23.64%. I understand the vagaries of the market but my understanding was that HVST invested in quality stocks with reasonable/good dividends and therefore should not be down so far. Can you provide some insight as the why and if a turnaround is possible. This is part of my super fund and I am 64. Regards Raimond Bazbauers

    1. Alex Cook  |  May 28, 2018

      Hi Raimond,

      The BetaShares Australian Dividend Harvester Fund is an equity income fund that aims to provide at least double the franked yield of the broader Australian equities market. As such, it is important to look at total returns (including dividends received), rather than just the change in unit price, as income can make up a significant part of the returns profile. As a brief summary of the fund, the fund operates a dividend rotation strategy, selecting up to the 14 highest gross dividend payers from the ASX 50 and holding them for 60 days (allowing them all to go ex-dividend) and then rotating into a new basket.

      If the stocks held in the basket underperform the market, this will obviously lead to relative fund underperformance and poor price return –historically we have seen periods where the rotation has worked for the strategy, and periods where this has worked against the strategy.

      When comparing different ETFs or funds, it is important to look at the underlying strategy. HVST may have a very different strategy from other funds in your portfolio, which may result in very different outcomes. For more information on the Fund’s strategy, please see here: https://www.betashares.com.au/wp-content/uploads/2017/06/Revisting_HVST_Strategy_final.pdf

      Please give BetaShares Client Services a call on 1300 487 577 if you have any further questions, we would be more than happy to provide assistance.

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