The Week In Review

Economy and Indices

The Australian market has been relatively subdued with a narrower trading range than the last few months. The ASX200 remains around the mid-point of the highs and lows since mid-August.

Australia’s third quarter Capital Expenditure (‘Cap-ex’) numbers were announced on Thursday considerably below expectations. This does not bode well for mining and mining services companies which have historically been large contributors to this statistic.

So far this week there have been similar movements for most of the developed economies. After breaking out of a recent trading range last week, the German DAX has continued higher this week.

Sectors

Sectors on the ASX are a classification which is given to each listed company to describe the industry group they operate within.

The top three sectors this week were:

1. Healthcare
This sector has been helped along with three of the five biggest Healthcare companies on the ASX up near their 52-week highs; CSL, RHC and COH

2. InfoTech
The IT sectors on the ASX is 44% Computershare (CPU). CPU performed well this week, which has driven IT to the top spot this week. There are dozens of much smaller IT companies that have performed exceptionally well this year, however most are not even in the ASX Top 300, let alone the ASX 200 which means they have no impact on this index. See Market Darlings below for some of these leading IT companies.

3. Consumer Staples
Woolworths and Wesfarmers (‘Coles’) dominate this sector. Both of these companies were coming off low bases from last week and their bounce back has taken this sector to the top groups

The Weakest sectors were:

1. Materials (mining)
Materials is dominated by BHP and RIO. Both company-specific news and world commodity prices have not been helpful to this sector this week.

2. Consumer Discretionary (retail)
This sector is more evenly spread than most sectors on the ASX and provides a balanced view of the sector. While some of the large Consumer Discretionary shares performed well this week, a lot of the smaller shares in this index were down. These smaller shares are well represented in the Mind-Cap index discussed below in Segments.

Segments

Segments are the classifications given to companies of similar sizes for their market capitalisation (total company value by share price). Within the ASX Top 200, the segments are:

– The 50 largest (‘Fifty Leaders’) and generally called the ‘blue-chip’;
– The next 50 companies (from 51 to 100th largest) are the ‘Mid-cap’ shares; and
– The last 100 of the Top 200 (from 101 to 200th) are the Small-caps’.

The Top Twenty (XTL) was the best performing segment this week. This often coincides when Financials perform well for the week (as mentioned in the Sectors above).

While the Mid-cap shares have led the ASX for a few months, they are the weakest segment this week.

The rest of the segments provided similar returns to the ASX 200 (XJO), which was only marginally behind XTL.

Market Darlings:

These are the shares we all wish our portfolios were filled with – the leading shares of the leading groups on the ASX.

Leading Market Themes

Consumer Discretionary shares have continued to perform well, notably: professional services, auto companies, food, media and entertainment companies. There are significantly more Consumer Discretionary shares in the Mid-Cap index (XMD) than the Top 50 (XFL) which has helped the Mid-Caps to continue to provide strong returns over the last six months. Given the small weighting the Mid-caps have on the XJO, the positive movements over the last few months have been negated by the largest companies in the XJO.

Technology companies, mostly software/‘cloud’ related and non-physical solutions, are providing the strongest returns on the ASX. A lot of these companies are small and mirco-caps and some are not even in the All Ords index (XAO).

Retirement related services also continue on a steady rise. These shares range from retirement homes, healthcare facilities and ageing services and technologies.