12 Mar 2013

Investor attention towards Australian shares was
dominated by the release of companies’ results
for the six months ending 31 December 2012. On
the whole, reported earnings were slightly ahead
of consensus expectations, which enabled the
sharemarket to rise in value for a ninth
consecutive month.
The S&P/ASX 200 Index rose above the
psychologically important 5,000 level for the first
time in nearly three years during the month. In
February as a whole, the S&P/ASX 200
Accumulation Index added 5.4%.
Stocks with a relatively high dividend yield have
tended to be well supported by investors in
recent months. Indeed a notable aspect of the
‘Reporting Season’ was an increase in companies’
dividend payments. Interim dividends from
Commonwealth Bank of Australia and Rio Tinto,
for example, were increased by 20% and 15%
respectively. This trend is likely to increase the
allure of equities in a low interest rate
Investors’ ongoing search for yield was reflected
in sector performance in February. Stocks in the
Consumer Staples and Financials sectors – which
tend to offer a reasonable dividend yield –
typically outperformed. Energy and mining stocks
continued to struggle to keep pace with the
broader market.
Gains made in February extended returns from
Australian shares to more than 28% in the
2012/13 financial year to date. Whether the
market can maintain this momentum will depend
on whether companies can continue to grow their
earnings and the tone of economic data, both
within Australia and overseas.
The market could also benefit if Australian
investors continue to reallocate their investments
away from cash and back into the share market.
We have seen some early evidence that this is
starting to occur; a stronger asset allocation shift
back into equities could provide the market with
some further momentum in the remainder of the

This is an excerpt from the latest market commentary from the Colonial First State Research Team.

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