Research Monitor - December Quarter 2017 Research20 Oct 2017

The Australian Share Market, as measured by the S&P/ASX 300 Index, fell by 0.6% on a price basis but rose by 0.8% on an accumulation basis during the September quarter, continuing a pattern of low returns.


Looking beneath the index level, however, there was much movement with the best performing sector – Capital Goods – outperforming the worst performing sector – Telecommunications - by 28.2%. Although the Capital Goods sector, led by Cimic Group (CIM) was the best percentage performer over the quarter, being up 9.9% on a price basis and 11.7% on an accumulation basis, it was the Materials Sector, led by BHP Billiton (BHP) which moved the index the most with a $13bn increase in market value. The Telecommunications sector – with a 18.8% fall in index heavy weight Telstra (TLS) took $11.7bn of market value off the index. Another sector to perform poorly – after years of strong performance – was the Health Care Equipment and Services sector which fell 8.8%. Ramsay Health Care (RHC) fell 15.4% and other hospital related stocks fell heavily as a combination of private health insurance reform and concerns about new supply coming on stream kept investors wary.


Cyclical stocks broadly outperformed defensive stocks as investors sought to rotate their portfolios into companies expected to benefit from improving, synchronised world growth. Energy, Materials and capital Goods sectors all performed well, whereas the more defensive Utilities and Insurance sectors performed poorly. A 9.1% fall in CBA shares was offset by 3-6% rises in the other big four banks to neutralise the Bank sector’s impact on the index.


Global markets performed well in the September quarter, even in spite of a 2.3% increase in the Australian dollar over the period. NASDAQ index was up 5.8% as technology stocks continued their recent strong gains, the broader S&P500 was up 4.0%, European stocks up 4.3% and the World index was up 3.9%. Fixed income markets went backward as bond yields rose, with the Bloomberg AusBond Composite (0+Y) Index down 0.1%.


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