Money
Issue No. 51 - February/March 2010
Australian market’s 2010 promise
by David Middleton
Seeking Investment Yields in South Australia With expectations of growing company profits and better economic conditions the Australian share market is well placed for decent returns this year.
In 2008 the Australian share market experienced the worst calendar year on record with a massive fall of 43%. In 2009 the market rose more than 30% but it remains 25% lower than it was at the end of 2007 and around 30% below its peak. We’ve got some catching up to do. Leading the charge in 2009 were stocks such as big banks, consumer discretionary and resources. Sectors such as healthcare and consumer staples lagged behind. The lagging sectors were mainly those which suffered least during the financial crisis. Over the 2009 calendar year:
• Big banks rose 60% (still 14% below December 2007)
• Resources rose 50% (also 14% down on December 2007)
• Consumer Discretionary rose 37% (still 40% below end 2007)
• Healthcare rose 2% (but only 9% lower than December 2007)
• Consumer Staples rose 26% (down 12% from end 2007)
• Energy was up 27% (the only sector up since December 2007 – by 3%.)
It is interesting to look under the bonnet of the Australian market. Investors are very confident about our mining industry, including energy, and are prepared to pay high prices. Materials represent about 25% of the Australian share market. Resources started recovering before the market reached its trough and resource prices have driven the market up. It is possible most of the good news for the resources sector is already in the price. The current consensus view is that the average profits made by Australia’s largest industrial companies will recover to a level higher than ever before by the middle of 2011. This includes all the major banks, retailers, insurance companies, health care and transport companies.
Share prices for these stocks fell dramatically in 2008 and the early part of 2009. They have recovered since but ...
