By CHRISTINE BROWN
DIRECTOR, WEALTH ADVISORY

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Australian Equities

Australian Equity Returns

Monthly Quarter 1 Year

3 Year 

5 Year 10 Year
ASX50 0.3% 1.4% 7.5% 3.5% 7.2% 5.7%
ASX200 0.4% 1.7% 10.1% 5.1% 8.0% 5.4%
ASX Small Ords

0.0%

2.7% 20.8% 10.8% 6.2% 1.1%
ASX 200 Financial-x-A-REIT (TR) 0.7% 0.3% 2.9% 1.8% 8.6% 9.0%

ASX 200 Consumer Discretionary (TR)

-1.5% 2.0% 14.3% 8.8% 12.3% 4.1%

ASX 200 Consumer Staples (TR)

2.2% 3.8% 16.8% 7.2% 4.6% 7.2%
ASX 200 Energy (TR) -3.7% 1.9% 19.9% -0.9% -2.2% -1.0%
ASX 200 Health Care (TR) 7.0% 9.9% 28.1% 14.6% 18.9% 14.2%
ASX 200 Industrials (TR) -0.4% -3.7% 16.9% 11.5% 11.7% 4.2%
ASX 200 Information Technology (TR) 1.3% 5.2% 32.0% 11.8% 11.8% 11.0%
ASX 200 Telecommunication (TR) -6.0% 0.0% -21.6% -13.5% 0.3% 3.8%
ASX 200 Materials (TR) 0.4% 7.2% 22.3% 9.8% 5.2% 0.1%
ASX 200 Utilities (TR) -1.7% -10.4% -1.8% 9.6% 12.3% 9.3%
ASX 200 A-REIT (TR) -3.3% -6.2% -0.2% 4.6% 10.0% 3.3%

 

 

The S&P/ASX 200 Accumulation Index rose 0.4% in February, with losses during the start of the month fully regained on a total return basis. In price terms, the index hit a high of 6121 points early in February, bottoming at 5821 points (a fall of 4.9%), and then recovering to end the month at 6016 points (90% recovered from the start of the month). February’s gains were driven by the health care sector (+7.0%), with CSL (+11.4%) the top performer on the back of record HY profit and a lift in its full-year guidance. 

Consumer staples (+2.2%) shares were also higher, with strong gains from market darling A2 Milk Co (+47.5%) following a big-earnings beat, while Woolworths (+2.5%) enjoyed a solid earnings performance, including a 3.8% rise in sales. The telecommunications sector (-6.0%) was the worst performing for the month, with Telstra (-4.4%) still out of favour since reducing its dividend, and Vocus Group (-18.1%) hit hard following a downgrade to its FY18 guidance and the departure of CEO Geoff Horth. The energy sector (-3.7%) also came under pressure, with Whitehaven Coal (-8.9%) battling higher-than-expected operating costs, albeit with the offset of a buoyant coal price. 

 

S&P/ASX 200 share price performance for the month to February

Best Performers Worst Peformers
A2 Milk Company 47.5% IPH 33.9%
Nine Entertainment Holdings 35.7% Myer Holdings 31.3%
Altium 32.8% Platinum Asset Management 22.9%
Corporate Travel Management 25.7% Blackmores 17.3%
Costa Group Holdings 19.3% Domino’s Pizza Enterprises -16.8%

 

S&P/ASX 200 share price performance for the year to February

Best Performers Worst Peformers
A2 Milk Company 453.4% IPH 62.6%
Altium 186.9% Myer Holdings 62.3%
Wise Tech Global 185.7% Platinum Asset Management 50.5%
Nine Entertainment Holdings 135.6% Blackmores 35.0%
Aconex 127.3% Domino’s Pizza Enterprises -30.8%

 

The Outlook

The latest (February) monthly NAB business survey was particularly encouraging. The important reading is business “conditions,” which reflect the reality of firms’ own trading, profit, and hiring and the reading for February was excellent: The business conditions index increased a further +3pts to +21 index points. This is a record high since the monthly survey commenced in March 1997.

The Reserve Bank agrees that the business cycle is picking up. After its March policy meeting, the bank said that “The Bank’s central forecast is for the Australian economy to grow faster in 2018 than it did in 2017. Business conditions are positive and non-mining business investment is increasing. Higher levels of public infrastructure investment are also supporting the economy. Further growth in exports is expected after temporary weakness at the end of 2017.”

There is a reasonable prospect of 2018 turning out to be a stronger year for business, but the question is how strong an impact will modestly faster growth have on corporate profitability. Credit Suisse’s latest forecast is that earnings per share will grow by 7% this year. CommSec also thinks that faster growth is on the cards and expects to see the S&P / ASX200 trading somewhere in the 6,150 to 6,550 region by the end of the year. That would present a pleasant turnaround from an extended period of subpar performance: Over the past 10 years, the index has averaged an annual price gain of only 0.8%.

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