The impact of the Japanese earthquake and events in the Middle East look set to undermine the momentum of February which a saw solid recovery for super fund returns.

Since markets bottomed out in the wake of the GFC, the median growth superannuation fund has made an impressive comeback, with specialist superannuation research and consultancy firm Chant West reporting a cumulative return of 31.5 per cent over the lest two years..

However, estimates from super research company SuperRatings have said the median balanced fund in March is down by 2.0 per cent, effectively wiping the gains made this calendar year by 1 per cent in both January and February respectively.

This is a better outlook then a few days ago, when, according to SuperRatings, March losses looked like erasing returns right back to November.

The recent events in Japan has “demonstrated just how swiftly and on what scale markets will react to negative global events, swinging from one extreme to another on a daily basis on the back of never ending news flow, taking our super fund returns along for the ride,” said SuperRatings.

Chant West said it will take another 5 per cent  gain from the end of February to regain the high point reached in October 2007 and with the tragic events in Japan resulting in a sharp downturn in March, “the task of regaining that former peak has just got even tougher.”

“It will take a while before we can assess the full global economic impact of the events in Japan. Clearly it’s had an immediate effect on confidence, but we don’t believe there will be a significant economic impact over the medium to longer term,” said Chant West director, Warren Chant.

“Japan is a major trading partner of Australia, taking 19 per cent of our goods exports in 2010. In the short term we expect to see a reduction in demand, which will affect our resource companies the most, but further out there will be extended recovery phase and that is likely to result in a rise in Australian exports of raw materials as well as other goods and services.”

While markets have regained confidence in the last few days, SuperRatings said volatility will remain high and investors’ nerves will continue to be tested by events in Japan and the Middle East.

However, on an encouraging note, despite the US S&P500 Index and the Australian market falling at one point this week to December and late November levels, SuperRatings reported that fund managers are confident, expecting markets to continue their recovery and seeing this market environment as an opportunity to buy quality companies at attractive prices.

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