Monthly Agenda March 2020 – Australian Equities
The Australian equity market’s performance in February was driven by two primary factors, being half year reporting season and escalating fears around the coronavirus, with the latter clearly the dominant driver. China’s initial virus containment measures were viewed favourably by investors as the rate of new infections slowed. However, a risk-off sentiment quickly swept through markets as the virus spread into Europe and various countries around the world, leading to a sharp drop of almost 10% in the final week of February. For the month, the ASX 200 Accumulation Index lost 7.7%, which was broadly in line with moves in offshore equity markets.
Results from half-year reporting season were still important in determining individual stock performance. At an aggregate level, earnings were softer than the low expectations leading into the month, while full year consensus forecasts were downgraded further, reinforcing the view of a low growth environment. At a sector level, cyclically exposed resources stocks suffered on commodity price weakness, with the energy sector losing 17% and materials 12%.
Information technology (-17%) succumbed to a potent mix of elevated valuations and earnings season disappointment. Defensive sectors typically outperformed, including utilities, health care and REITs, with all three supported by the ongoing decline in bond yields in anticipation of central bank support for markets.
ASX 200: Monthly Earnings Per Share RevisionsEnlarge Source: Bloomberg. Data as at 10/3/20