Australian investors have been spooked this month after the local stockmarket took a peak at 6000 points and promptly turned south, punishing investors and superannuation balances.

Since touching a six-year high on March 3, the S&P/ASX 200 index has shed more than three per cent, with mining, energy and infrastructure shares absorbing the biggest hits thanks to a stream of downbeat economic news.

Blue chip mining stocks such as BHP Billiton, Fortescue and Newcrest have been pasted.

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BHP has fallen by around 12 per cent since touching a year-high of $34.29 two weeks ago, while the shares of iron ore rival Fortescue have plunged 18 per cent this month to touch a six-year low of $2.

If the trend continues, most superannuation members with exposure to equities in superannuation funds will begin to see some erosion of their recent big gains.

AustralianSuper’s balanced fund and its ‘Australian shares’ investment option have both returned more than 10 per cent since July 1 last year.

Super members with cash invested in Hesta’s ‘Australian shares’ option were sitting on a year-to-date return of 11.2 per cent on March 3, but that had tapered to 9.79 per cent on March 10.

Australian economy struggles to grow

The weak economic data this month appears to confirm the Reserve Bank’s view that the Australian economy is likely to grow below its historical average rate in the next 12 months.

This has caused the central bank to loosen monetary policy, with more official rate cuts expected this year to stimulate consumer demand.

The RBA is expected to drop rates again later this year.

However, the February rate cut has done little to stimulate consumer spending, according to the latest Westpac/Melbourne Institute Index of Consumer Sentiment.

This closely watched measure of consumer sentiment slipped to 99.5 this month. Whenever this index falls below 100 it means that most households are pessimistic about the outlook for the economy and are therefore less inclined to increase spending.

Westpac senior economist Matthew Hassan observed that recent petrol price rises contributed to the decline in sentiment and partly offset the impact of the rate cut on household budgets.

Reserve Bank assistant governor Chris Kent last week told a conference in Hobart that low official interest rates would eventually support a recovery in economic activity, but it would take longer than expected.

“[T]here is little to suggest that it (economic growth) will increase in the near term,” Dr Kent said.

“This implies that the unemployment rate will rise for a bit longer and peak a bit higher than previously expected.”

Fund managers stretched to find value in listed equities

This uncertain economic environment and the historically high valuations of non-mining stocks have caused some big fund managers to pare their exposures to many listed companies this month.

Australia’s largest fund manager, Perpetual Limited, was a particularly active seller of shares last week after reducing its major stakes in Fletcher Building, Nine Entertainment, STW Communications and ARB Corporation.

The falling Australian dollar could potentially fuel bigger profits for exporters, says one investment manager.

While these disclosures might only indicate that the fund manager is merely rebalancing its portfolios and taking some profits in a bullish market, there are many investment experts warning that the local market is due for a correction.

Some boutique fund managers who pursue value-driven investment strategies are urging their clients, including superannuation funds, to at least trim their holdings of equities.

Others are still seeing opportunities for growth on the ASX and are advising clients to be selective.

Steven Robinson, the senior investment manager at Alleron Investment Management, believes the falling Australian dollar could potentially fuel bigger profits for exporters.

“One of the big themes helping certain companies in the market is the falling currency,” he said. “Export companies are getting a benefit and we’ve seen some of that coming through in higher earnings.”

Mr Robinson highlighted Resmed and Cochlear as companies positioned to benefit from the sliding Australian dollar.

What can super members do?

If you super is invested in an equities-only option like Hesta’s “Australian shares”, it might be time to lock-in some of those recent big gains by re-allocating some of your funds to a balanced or conservative option.

Balanced funds usually hold big investments in government bonds and cash, which are historically less volatile than shares.

While your returns are likely to be lower than the double-digit gains posted by shares-only investment options, your super account will be better able to weather a stock market correction.

Before changing your investment preferences you should consult an independent financial adviser to ensure the choices you make fit your goals and circumstances.