Research Monitor - June Quarter 2017 Research11 Apr 2017

The Australian Share Market, as measured by the S&P/ASX300 Index, rose by 3.4% on a price basis and 4.7% on an accumulation basis during the March Quarter, mirroring the gains of the previous two quarters.


The March quarter was characterised by two distinct periods – a game of two halves if you will. In the early part of the quarter, continued improvement in commodity prices and in the anticipation of further hikes in US interest rates, economically sensitive stocks, notably resources, performed well. The Materials sector, led by BHP, rose by 7.6% in the first six weeks of the quarter, before falling 7.0% in the last six weeks of the quarter to end up square. Financial Services stocks, on the other hand, fell 2.2% in the first six weeks of the quarter and then rose 7.0% in the following period to end up 5.7% for the quarter.


At a sector level, Pharmaceuticals, Biotech and Life Sciences – led by market heavyweight CSL – rose 24.8%, was the best performer. Transport, led by Transurban (TCL) was the next best performer up 11.8%. A key reason for the recovery in defensive stocks such as CSL and TCL was the sharp sell-off in long term bonds that occurred in the December quarter did not continue and many stocks recovered from over-sold positions.


The weakest performers of the quarter were Industrial companies who’s operations are being disrupted by supply-chain dynamics and competitive forces. Brambles (BXB) led the Commercial & Professional Services sector 11.8% lower after it revealed a sharp fall in pallet utilisation in its key North American markets. Similarly, Harvey Norman (HVN) lead the Retailing sector 6.1% lower as fears regarding the impact of Amazon’s entry into the Australian market weighed on the stock. Finally Telstra (TLS) fell 9% dragging the Telecommunications sector 4.5% lower as the NBN churn event causes significant price discounting.


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