The latest edition of our fortnightly email newsletter was sent to subscribers on the 15th of July. This edition looked at whether borrowing to invest is worthy of consideration, provided a summary of the movements in markets over the past fortnight and looked at the failure of forecasts over the past financial year. If you would like to be added to the mailing list please click the following link to be taken to the sign up page - The Financial Fortnight That Was Sign Up Page.
The latest edition also contained the following Market Update:
ASX P/E Ratio and Dividend Yields
From this edition we will be reporting on changes in the Price / Earnings ratio and Dividend Yields as reported by ASX Research. The P/E ratio is a common broad indicator of the price of shares. It is a calculation of the price of shares compared to expected earnings. A higher ratio indicates that share prices are more expensive. The historical P/E ratio for the ASX has been between 14 & 15.
As of July 8th the P/E ratio for the S&P/ASX 200 was 10.92. The dividend yield is 4.73%.
Since our previous edition, Australian and global sharemarkets along with listed property have continued to experience negative movements. The S&P ASX200 Index has fallen 4.91% from the 27th of June to the 11th of July. It is now down 21.27% from the same time last year and down 21.45% for the calendar year (2008) so far. The MSCI World - ex Australia, a measure of the global market, has fallen 3.89% over the same period. The index is down 21.33% from the same time last year and down 17.50% for the calendar year so far.
Emerging markets have also experienced negative movement with the MSCI Emerging Markets Index falling 4.79% since the 27th of June. It is down 9.42% from the same time last year and down 17.49% for the calendar year so far.
Property trusts have seen the greatest falls since the 27th of June with the S&P ASX 200 A-Reit Index falling by 14.31%. The index is down 46.76% from the same time last year and also down 40.81% for the calendar year so far. The S&P/Citigroup Global Real Estate Investment Trust (REIT) Index, a measure of the global property market, has fallen 6.33% over the same period. It is down 27.75% from the same time last year and down 18.10% for the calendar year so far.
As of 4pm the 11th of July, the value of the Australian dollar has been relatively flat against major benchmarks for the fortnight. It has risen slightly against the US Dollar by 0.02% at .9602. It is up 11.56% from the same time last year and up 8.92% for the calendar year so far. Since June 27th the Aussie has fallen slightly, -0.41%, against the Trade Weighted Index now at 73.1. This puts it up by 5.71% since the same time last year and up 6.40% for the calendar year so far. (The Trade Weighted Index measures The Australian dollar against a basket of foreign currencies.)
Since our last edition the Australian Bureau of Statistics has released the latest employment data with the official unemployment rate falling slightly to 4.2% as of the end of June. The participation rate has risen slightly to 65.3% with employment levels rising by 29,800 jobs.
The Reserve Bank of Australia board also met on the 1st of July and decided to keep the official interest rate target steady at 7.25%. The statement published with the decision indicated that the RBA believes that there are tentative signs that inflationary pressures are easing slightly. Since then, effective mortgage rates have actually risen due to increases passed on by individual banks in the system.