Without a surge in the June quarter and the month of June, led by the big banks and miners, Australian stockmarket investors would have been looking at a flat financial year, a flat quarter and virtually no capital gains.
A strong performance in the June quarter saw the ASX 200 end the financial year with a gain of 8.3% instead of a subpar, possible less than inflation (2.1%) rise.
While on the surface it looked a market of two halves – growth being faster in the six months to December as the period January to June 30 saw a gain of just 2.3%, A strong rise in the June quarter saved the day.
The ASX 200 jumped nearly 7.6% in the three months to June – making up 90% of the financial year’s rise. And nearly half that quarterly rise came in June with a gain of 3.4%.
In other words, the Australian market was far more resilient in the closing quarter of 2017-18, at a time global tensions, especially in Asia between the US and China (our biggest market) were at their highest as President trump’s tweeting of trade war threats peaked.
With dividends counted in the gain will be around 13.6%, while most balanced style super funds will see gains from 7% to 9%, according to analysts. Miners helped power the overall gain – led by energy stocks. Banks held us back, especially in the financial year, but the sell-off halted in June when bank shares stabilised or rose slightly.
The biggest international problems were North Korea, unpredictable US policy, especially the Trump threats of a trade war with China and Europe. AMP Capital chief economist Shane Oliver called 2017-18 a “pretty solid year” and he is forecasting another 12 months of solid, if unspectacular, returns on the local bourse.
“I don’t think we’re about to plunge into a global recession, but I doubt we’ll see another year of double digit returns,” he said in his weekend note.
“While we continue to see share markets as being higher by year end as global growth remains solid helping drive good earnings growth and monetary policy remains easy, we are likely to see more volatility and weakness between now and then as the US trade threat could get worse before it gets better and as worries remain around the Fed, President Trump in the run up to the US mid-term elections, China, emerging markets and property prices in Australia,” Dr Oliver wrote.
Over the year to June, bank shares (which dominate the market) were weak – the CBA’s shares fell 12%, but in the June quarter they rose 0.7% and jumped 6% in the month of June (which helped the overall quarterly gain).
The CBA benefitted from the news of the spin-off of its non-bank financial services arms and resolution of the Austrac money laundering case, plus the move to claw back $60 million in bonuses from past and current executives.
Westpac shares fell 4% over the financial year, but rose 2.3% in the quarter and jumped 5.6% in June.
NAB shares lost 7.3% in value over the year, 3.8% over the June quarter but was up 2.8% in June. ANZ did well, the shares down just 1.67% over the financial year, up 5.1% over the quarter and 5.3% in June.
Market commentators missed the impact of the June rally in banks – if you read some of their efforts the sector is in terrible trouble, thanks to the royal commission but high end investors don’t think so (the end of the financial year, especially for the CBA dividend helped, which is why it outperformed).
Macquarie Group shares jumped nearly 40% in the financial year, 20% in the June quarter and 9.6% in June in a standout performance for the sector.
The big miners performed strongly as the boomlet in commodity prices continued, the value of the Aussie dollar fell late in the financial year, iron ore prices faded but didn’t collapse as they did in 2015 and early 2016, copper performed well (but zinc rose, then sold off) and coal, oil and LNG were all star performers with solid rises. Australian thermal coal prices for example, hit six year highs in late June.
BHP shares were up 45.6% for the year to June, 20% for the June quarter, slowing to a small 2.5% gain for June, all of which and more came with a 4.5 plus rise last week.
Iron ore prices ended around $US65 a tonne, down from just over $US68 a tonne at the end of last December and well off the highs around $US72 a tonne in late February
Rio Tinto shares were a bit weaker – up 31.8% for the financial year, 14.7% for the quarter, but ran out of puff in June when the stock could only manage a gain of 1.1% (all of which came in the last week of the month, like BHP).
Shares in South32 ran out of puff towards the end of the financial year when they rose 34.7%. The June quarter saw a 12.1% gain, but a 4.7% fall in June and a half a per cent dip last week. OZ Minerals shares were up 27% for the year, just 4.7% for the quarter and down nearly 5% for June as global copper prices surged to four year highs, then retreated. Weakening gold prices didn’t help, even after the fall in the Aussie dollar’s value
Woolies shares rose nearly 20% over the financial year, 16% for the June quarter and 7.6% for June – a solid, market leading performance. Shares in rival Wesfarmers jumped 23% over the year as it got rid of the billion dollar black hole in the UK and revealed the spin-off of Coles. The shares were up 18.7% in the three months to June and more than 9% in the month of June.
In media Seven West Media shares staged a huge recovery after the company revealed big cost cuts over the next 18 months, dropped its dividend, lost the tennis TV rights and then shared the cricket TV rights with Foxtel. The shares were up 17.6% for the year (a change from big losses), 55.6% for the quarter and 3% for June.
Nine Entertainment shares were the star, rising 79% over the year, 9.2% for the quarter and 4.2% for June. Fairfax Media shares were up 11% for the quarter, but down 31% for the year (during which it spun off Domain, which saw the price adjust lower). The shares were up 8% in June and nearly 5% last week.
For News Corp there was no spillover the the surge in the shares of Murdoch family stablemate, 21st Century Fox whose shares were up 76% for the financial year because of the bidding war between Disney and Comcast. News Corp shares rose 11.6% in US dollar terms (15.5% in Aussie dollars), but were down nearly 5% in the quarter and 1.8% in June (in US dollars).
CSL though stood out with a 39% gain through the year, 23.9% in the June quarter and 3.4% in the month of June. Cochlear shares were up 28.7% for the year, 10% for the quarter and just 1.5% for June.
Cochlear shares became the first to hit $200 each – finishing on $200.65 on Friday.
For the June quarter, shares in Wisetech Global jumped 66.2%, Xero shares jumped 34.6%, while IRESS rebounded from a weak first quarter to close 26.9%. Appen and AfterPay Touch entered the ASX 200 as part of the June index rebalance. Appen shares rose 50.4%, while Afterpay Touch surged 45.2%.
Telstra was among the disasters – the shares losing 39% in the financial year (which will have damaged a lot of portfolios), 16.5% in the quarter and 5.7% in June.
AMP shares fell 24% to $3.56 during the quarter, 31% for the year to June and 7.3% in June.
Retail Food Group was the worst-performing stock for 2017-18, the shares off 89%, 42% for the quarter and 33% for June.
Breast reconstruction group Airxpanders, (86% for the year, 78% for the quarter, but up 5.7% for June). Brisbane-based hedge fund, Blue Sky Alternative Investments saw its shares slide 82% in the year, 33% for the quarter and nearly 4.5% for June.
Amid the faddish dairy based stocks, A2Milk saw its shares sold off in the June quarter, leading to a fall of 8.2%, but a rally in June of 9.6% saw the shares end the financial year up 179%. Bellamy’s however saw its shares fall 21.6% in the quarter and 7.8% in June, but still ended the financial year up a very tasty 124.9%.
And an odd performance came from cheap retailer, The Reject Shop – The shares were up 36% for the year to June which was solid, but they slumped more than 28% in the June quarter and 7.3% in the month – is the market telling us to expect a surprisingly weak performance for the second half to June?
And we can’t have stockmarket disasters without mentioning Myer, the department store chain – a long list of red – nearly 57% for the financial year, 43% for the quarter, 1.3% for the quarter, 16% for June and over 6% for the final week of June.