• For the month the Small Ordinaries rose by 1.5%. Small caps were modestly stronger than large caps (+0.4%).  Small Resources (+5.2%) outperformed driven by Gold and Energy.
  • There was no change to official rates from either the RBA or Fed. However, more hawkish commentary from some Fed board members has seen a slight softening in bond yields and weakness in longer duration / yield stocks (AREITS -4.3% and Utilities -3.6% in September).
  • Energy prices were supported by the Algiers OPEC agreement to cap production at 32.5 to 33.0 mbd. There remains doubt as to whether the production cap will prove effective.   The decision by the Philippines to crackdown on mines with a poor environmental record has seen firmer nickel prices and a number of Australian gold miners impacted reminding us once again to consider sovereign risk when investing in companies.
  • M&A activity has increased as organic growth proves difficult to achieve.  During the period some of the deals announced included JB Hi-Fi buying the Good Guys, private equity bidding for SAI Global (refer below), Hitachi bidding for Bradken, Nomura for ASG Group and Superloop buying BigAir.


  • Interest rate expectations will remain a key driver of equity valuations and the market has focussed on suggestions of an end to QE in Europe and Japan.
  • Stocks with sound valuations, solid balance sheets and recurrent earnings should outperform.