BT Monthly Markets Chart Pack – October 2008 An overview of movements in global financial markets.

BT Monthly Markets Chart Pack – October 2008

An overview of movements in global financial markets

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Global share markets hammered in October...

Moves by US and other governments to prevent a collapse of their respective financial systems weren’t enough to appease investors already hurt by big losses in September.

In the US, stocks closed the month 16.9% lower, while bourses in the UK (-10.7%), Europe (-14.7%) and Japan (-23.8%) also finished well in the red.

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Global shares measured by the MSCI World ex-Australia (net dividends) Index in A$.Source: BT Financial Group, MSCI

Impact of major market events on global shares since 1986

…but continue to perform well over the long-term, despite some major market events

700

1,200

1,700

2,200

2,700

3,200

3,700

4,200

4,700

5,200

5,700

6,200

Oct-86 Oct-88 Oct-90 Oct-92 Oct-94 Oct-96 Oct-98 Oct-00 Oct-02 Oct-04 Oct-06 Oct-08

Jan 91Gulf War

Feb 94Bond Market Crash

Aug 97Asian Currency Crisis

Jul 98Russian Bond Crisis

Jul 01Tech Wreck

Sep 01Attack on Twin Towers

Jun 07US Sub-prime Crisis

Oct 87Wall Streetcrash

Nov 89Fall of the Berlin Wall Mar 03

Troops enter Iraq

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The Australian share market fared a little better …

The S&P/ASX 200 Accumulation Index closed the month 12.6% lower.

The fall came largely on the back of a poor lead from the US and weaker commodity prices, which really hurt our big mining stocks.

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Source: BT Financial Group, Premium Data

S&P/ASX 200 Accumulation Index – year to 31 October 2008

24,500

26,500

28,500

30,500

32,500

34,500

36,500

38,500

40,500

42,500

44,500

30/10/2007 30/12/2007 29/02/2008 30/04/2008 30/06/2008 30/08/2008 30/10/2008

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Key Australian economic news – October

The Reserve Bank cut interest rates by 1.00% in October and again by 0.75% at its early November meeting in a bid to improve the flow of credit to consumers and businesses.

Australia’s international trade balance was in surplus by $1.364 billion in August. It followed a deficit of $697 million in July and came on the back of strong growth in exports and falling imports.

The Westpac/Melbourne Institute consumer sentiment index fell 10.2pts to 82.0 in October, with all five component indices falling in the month. Of these, ‘economic conditions in the next 12 months’ registered the worse decline while ‘employment expectations’ also slipped sharply.

Newspaper job ads gained 0.7% in the month of September, while Internet-based job ads registered a second consecutive monthly decline, down 1.5%.

Source: BT Financial Group

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The Australian dollar hit hard in October

The Australian dollar (A$) fell 15.8% against the US dollar (US$) in October thanks to weaker commodity prices and a resurgent US$. With commodity prices likely to remain under pressure in the near-term and the RBA expected to cut interest rates again this year, it’s likely that the A$ will fluctuate around current levels as we move into 2009.

At the end of October:

A$1 bought US$0.6676 -15.8%

€0.5248 -6.7%

¥65.72 -21.9%


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Currency markets – A$ per US dollar

Source: BT Financial Group. Figures at 31 October 2008.

0.6500

0.6800

0.7100

0.7400

0.7700

0.8000

0.8300

0.8600

0.8900

0.9200

0.9500

0.9800

Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08

The Australian dollar versus the US dollar…

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Currency markets – A$ per Euro

the Euro…

0.5200

0.5350

0.5500

0.5650

0.5800

0.5950

0.6100

0.6250

0.6400

0.6550



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and the Yen

65

70

75

80

85

90

95

100

105

110


Currency markets – A$ per Yen


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Official world interest rate movements – October

In Australia, the Reserve Bank cut the official cash rate a further 0.75% (to 5.25%) at its early November meeting. Elsewhere (in October), the European Central Bank, the Bank of England and the US Federal Reserve all cut their benchmark interest rates, while the Bank of Japan left theirs’ on hold.

Current rate Last movedDirection of last move

Australia 5.25% Nov 2008

US 1.00% Oct 2008

Europe (ECB) 3.75% Oct 2008

Japan 0.50% Feb 2007

United Kingdom 4.50% Oct 2008


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31 October 2008

Global share market returns

1 year 3 years (pa) 5 years (pa)

Global

S&P 500 Index (US) -37.47% -7.07% -1.61%

Nasdaq (US Tech.) -39.81% -6.72% -2.29%

Nikkei 225 (Japan) -48.76% -14.26% -4.07%

Hang Seng (Hong Kong) -55.45% -0.98% 2.76%

DAX (Germany) -37.80% 0.40% 6.44%

CAC (France) -40.37% -7.71% 0.67%

FTSE 100 (UK) -34.88% -6.28% 0.42%

Australia

S&P/ASX 200 Accum. Ind. -37.79% 0.73% 8.69%

S&P/ASX Small Ordinaries -53.27% -6.54% 3.60%

S&P/ASX 300 Listed Prop. -56.36% -12.60% -0.68%

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Short-term asset class performance

Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$

1-year rolling returns to 31 October 2008 (%) Best performing asset class for the year

2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993

Australian cash

7.80 6.61 5.90 5.71 5.54 4.88 4.67 5.61 6.07 4.94 5.14 5.98 7.68 7.87 5.05 5.61

Australian bonds

10.59 3.62 4.40 5.18 7.17 4.15 4.24 11.67 7.60 -0.61 9.65 13.23 14.56 16.60 -6.11 17.58

Australian property

-56.36 18.48 29.13 12.25 28.99 6.35 10.23 21.22 12.55 -0.27 19.19 17.16 14.33 8.87 0.24 25.42

Australian shares

-38.29 30.46 26.33 22.67 20.56 12.52 -2.64 3.38 19.07 14.79 10.02 9.27 17.55 6.68 -0.93 50.84

International bonds

43.39 -8.63 1.49 -1.78 5.17 -10.60 -0.76 11.82 16.74 -4.75 27.49 15.45 1.06 12.37 -6.99 16.93

International shares

-17.66

-0.24 16.95 13.00 7.35 -3.48 -22.89 -23.79 24.42 22.15 30.76 31.83 11.54 6.87 -3.43 32.36

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Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$

1-year returns to 31 October 2008 (%)

Short-term asset class performance (cont’d)

-17.7

43.4

-38.3

-56.4

10.6

-0.2

-8.6

30.5

18.5

3.6

31 October 2007

31 October 2008

Australian bonds

Listed property

Australian shares

Global bonds

Global shares

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Long-term asset class performance

Note: Accumulated returns based on $1,000 invested in December 1984Source: S&P/ASX 300 Accumulation Index, MSCI World ex-Australia (net dividends) Index in A$, S&P/ASX 300 Property Index, UBS Composite 0+ years index, Citigroup World Government Bond, Unhedged in A$

31 October 2008

Australian bonds

Listed property

Australian shares

Cash

Global shares

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Source: BT Financial Group. West Texas Intermediate oil price at 31 October 2008.

Oil prices – US$ per barrel

Oil prices fell again in October as demand evaporated in line with the slowing global economy

$0

$15

$30

$45

$60

$75

$90

$105

$120

$135

$150

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

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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. Admittedly, we are beginning to feel the knock-on effects of a slowdown that’s impacted countries like the US and the UK.

The RBA’s decision to lower the official cash rate in October and again in November highlights the Bank’s concern that the economy is heading into recession.

In line with this view, there’s a chance the RBA will cut rates again in December.

The Australian dollar has fallen 23.8% so far this year. With commodity prices likely to remain under pressure in the near-term and a possible rate cut in December, we think it will continue to trade around current levels as we move into 2009.

Gains in share markets are likely to remain under pressure in the near-term.

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This presentation has been prepared by BT Financial Group Limited (ABN 63 002 916 458) ‘BT’ and is for general information only. Every effort has been made to ensure that it is accurate, however it is not intended to be a complete description of the matters described. The presentation has been prepared without taking into account any personal objectives, financial situation or needs. It does not contain and is not to be taken as containing any securities advice or securities recommendation. Furthermore, it is not intended that it be relied on by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice. BT does not give any warranty as to the accuracy, reliability or completeness of information which is contained in this presentation. Except insofar as liability under any statute cannot be excluded, BT and its directors, employees and consultants do not accept any liability for any error or omission in this presentation or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise noted, BT is the source of all charts; and all performance figures are calculated using exit to exit prices and assume reinvestment of income, take into account all fees and charges but exclude the entry fee. It is important to note that past performance is not a reliable indicator of future performance.

This document was accompanied by an oral presentation, and is not a complete record of the discussion held.

No part of this presentation should be used elsewhere without prior consent from the author.

For more information, please call BT Customer Relations on 132 135 8:00am to 6:30pm (Sydney time)

BT Monthly Markets Chart Pack – October 2008 An overview of movements in global financial markets.

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