Research Monitor - March Quarter 2017 Research16 Jan 2017

The Australian Share Market, as measured by the S&P/ASX300 Index, rose by 4.0% on a price basis and 4.9% on an accumulation basis during the December Quarter, mirroring the gains of the previous quarter.

 

The key feature of the quarter was the surprise market behaviour around the US Presidential Election. Most market commentators had figured that a Clinton victory would be good for markets and a Trump victory would be bad, based mostly on an assessment of known versus unknown. The expectation of a pick-up in government spending in the United States, a higher level of economic growth, rising inflation and therefore higher interest rates is being built into share prices.

 

At a sector level, Banks and Insurance stocks were the belles of the ball, up 13.8% and 16.0% inclusive of dividends for the quarter. The Capital Goods and Utility sectors also performed well, up 10.9% and 9.2% respectively, including dividends. In fact, all of the returns of the market for the December quarter were from six stocks. CBA, WBC, BHP, ANZ, NAB and QBE. The remainder of all other stocks in the ASX300 comprised zero returns when combined together.

 

Analysis of the top performers from a market perspective in the December quarter shows that a “bar-bell” approach of holding banks and resources stocks performed particularly well.

 

Moving in the other direction were the Health Care and Pharmaceutical sectors which both retreated over 8% for the quarter. CSL was amongst the worst performers, down 6.8%, alongside Ramsay Healthcare (RHC) down 14.6%. The move in the 10 year bond rate from 1.91% to 2.70% over the quarter kept pressure on Infrastructure stocks with Transurban (TCL) down 9.8% and Sydney Airport (SYD) down 14.4%

 

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