Transcript Slide 1

BT Monthly Markets
Chart Pack – December
2007
An overview of movements in global financial markets
Global share markets mixed in December
 December was a mixed month for global share
markets as investors continued to worry about the usual
suspects – weakness in the US housing market, the
fallout from the global credit crisis, and the threat of a
recession in the US. Bourses in the US and Japan were
weaker, while share markets in Europe, the UK and
China made positive gains.
 In Australia, the S&P/ASX 300 Accumulation Index
closed the month down 2.64%. The local market was
dragged lower by the listed property sector after Centro
Properties became the first major (local) casualty of the
global credit crisis. Weakness in mining stocks also
affected performance as a softer outlook for global
growth weighed on commodity prices.
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The Australian share market closed the year on a
weaker note
S&P/ASX 300 Accumulation Index – year to 31 December 2007
43,000
42,000
41,000
40,000
39,000
38,000
37,000
36,000
35,000
34,000
31/12/06
28/02/07
Source: BT Financial Group, Datastream
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30/04/07
30/06/07
31/08/07
31/10/07
31/12/07
Key Australian economic news – December
 The Reserve Bank of Australia (RBA) left interest rates on hold at 6.75%
following its December meeting, though their decision came as no real surprise
in light of recent financial market turmoil. Rates are widely expected to remain
on hold again when the RBA next meets in February, unless the latest CPI data
on 24 January comes in on the high side.
 Employment figures were surprisingly weaker in November. The
unemployment rate came in at 4.5%, while October unemployment was revised
up from 4.3% to 4.4%. This brought the unemployment rate up 0.3% from its
September low of 4.2%, putting it back to where it was in March of this year.
 After unexpected weakness in October, retail sales rebounded strongly in
November, up 0.8%. This took annual retail sales growth to 8.1%; the fastest
growth since mid-2004.
 November building approvals came in well above market expectations, rising
by almost 9% over the month.
Source: BT Financial Group
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The Australian dollar slightly weaker in December
 The Australian dollar (A$) was slightly weaker against the major currencies in
December amid ongoing concerns over the global economic outlook and the
impact that slower growth would have on commodity prices.
 At the end of December:
A$1 bought
Source: BT Financial Group
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US$0.8751
-1.1%
€0.5999
-0.7%
¥97.77
-0.6%
The Australian dollar versus the US dollar…
Currency markets – A$ per US dollar
1.0000
0.9500
0.9000
0.8500
0.8000
0.7500
0.7000
0.6500
0.6000
0.5500
0.5000
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Source: BT Financial Group. Figures at 31 December 2007.
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Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
the Euro…
Currency markets – A$ per Euro
0.6500
0.6350
0.6200
0.6050
0.5900
0.5750
0.5600
0.5450
0.5300
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Source: BT Financial Group. Figures at 31 December 2007.
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Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
and the Yen
Currency markets – A$ per Yen
110
105
100
95
90
85
80
75
70
65
60
Dec-02
Jun-03
Dec-03
Jun-04
Dec-04
Source: BT Financial Group. Figures at 31 December 2007.
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Jun-05
Dec-05
Jun-06
Dec-06
Jun-07
Dec-07
Official world interest rate movements – December
 Both the US Federal Reserve and the Bank of England cut interest rates in
December, while the European Central Bank and the Bank of Japan
decided to leave rates on hold.
Current rate
Last moved
Australia
6.75%
Nov 2007
US
4.25%
Dec 2007
Europe (ECB)
4.00%
Jun 2007
Japan
0.50%
Feb 2007
United Kingdom
5.50%
Dec 2007
Source: BT Financial Group
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Direction of
last move
World growth is expected to be 3.7% this year, and
a further 3.2% in 2008
2008 world growth estimates
Month of estimate
May 07
Jun 07
Jul 07
Aug 07
Sep 07
Oct 07
Nov 07
Dec 07
Australia
3.5%
3.5%
3.5%
3.6%
3.6%
3.7%
3.7%
3.6%
US
2.8%
2.9%
2.8%
2.6%
2.4%
2.4%
2.3%
2.1%
Japan
2.2%
2.2%
2.2%
2.1%
2.1%
1.9%
1.8%
1.5%
China
9.8%
9.8%
9.9%
10.6%
10.6%
10.7%
10.5%
10.5%
Germany
2.3%
2.3%
2.4%
2.4%
2.3%
2.2%
2.1%
1.9%
UK
2.3%
2.3%
2.2%
2.2%
2.1%
2.0%
1.9%
1.9%
World
3.4%
3.4%
3.4%
3.4%
3.5%
3.4%
3.4%
3.2%
Source: Consensus Economics
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Global share market returns
31 December 2007
1 year
3 years (pa)
5 years (pa)
S&P 500 Index (US)
3.53%
6.61%
10.79%
Nasdaq (US Tech.)
9.81%
6.83%
14.71%
Nikkei 225 (Japan)
-11.13%
10.04%
12.28%
Hang Seng (Hong Kong)
39.31%
25.03%
24.44%
DAX (Germany)
22.29%
23.76%
22.77%
CAC (France)
1.31%
13.68%
12.88%
FTSE 100 (UK)
3.80%
10.28%
10.38%
S&P/ASX 300 Accum. Ind.
16.22%
21.01%
21.11%
S&P/ASX Small Ordinaries
17.05%
23.39%
25.77%
S&P/ASX 300 Listed Prop.
-8.36%
11.45%
14.77%
Global
Australia
Source: BT Financial Group
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Short-term asset class performance
1-year rolling returns to 31 December 2007 (%)
2007
2006
2005
2004
2003
2002
2001
2000
1999
Best performing
asset class for the
year
1998
1997
1996
1995
1994
1993
1992
Australian
cash
6.73
6.02
5.74
5.62
4.90
4.77
5.24
6.27
5.01
5.14
5.63
7.57
8.06
5.34
5.39
6.92
Australian
bonds
3.46
3.14
5.80
6.96
3.05
8.81
5.45
12.08
-1.22
9.54
12.23
11.87
18.63
-4.66
16.32
10.41
Australian
property
-8.36
34.05
12.70
32.18
8.81
11.85
14.99
18.79
-4.20
18.37
21.76
14.24
14.28
-6.32
29.97
6.59
Australian
shares
16.22
24.51
22.45
27.92
14.96
-8.64
10.49
6.31
19.52
9.75
12.15
14.54
20.75
-8.82
40.61
-2.88
International
bonds
-0.40
-1.24
-0.48
6.05
-14.11
8.63
7.48
19.63
-10.26
22.49
22.18
-2.96
24.13
-10.81
15.27
16.54
International
shares
-2.60
11.49
16.84
9.94
-0.76
-27.44
-9.96
2.19
17.20
32.34
41.63
6.24
26.05
-8.43
24.47
4.78
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 December 2007 (%)
31 December 2006
31 December 2007
3.1
3.5
Australian bonds
Listed property
34.1
-8.4
24.5
Australian shares
Global bonds
Global shares
16.2
-1.2
-0.4
11.5
-2.6
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 December 2007
$24,000
$22,500
Australian shares
$21,000
$19,500
$18,000
Listed property
$16,500
$15,000
$13,500
$12,000
Global shares
$10,500
Australian bonds
$9,000
$7,500
Cash
$6,000
$4,500
$3,000
$1,500
$0
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 closed the year 57.1% higher at US$95.99 a barrel,
before going on to hit US$100 in early January
Oil prices – US$ per barrel
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
87
88
89
90
91
92
93
94
95
96
97
98
99
00
Source: BT Financial Group. West Texas Intermediate oil price at 31 December 2007.
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01
02
03
04
05
06
07
Summary

We expect global growth to hold up, though the threat of a recession in the
US has obviously increased recently and this will pose a significant risk to
future growth.

The underlying strength of the Australian economy looks set to continue,
though any significant deterioration in global growth will obviously have an
adverse effect locally.

Despite the RBA’s decision to leave interest rates on hold in December, the
Bank clearly retains a tightening bias. Whether the RBA pulls the trigger on
another rate hike in February will depend largely on the next round of inflation
data due out in late January.

The threat of a slowdown in global growth will mean a rougher ride for the
Australian dollar in the near-term, though it looks set to remain at high levels.

Gains in global share markets, including here in Australia, are likely to slow in
the first half of 2008.
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