May 17, 2022


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March In Review: War Puts ASX On Pedestal

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Gains in the resources, banking and technology sectors contributed to a 6.9% total return for the ASX200 in March, as Australia continued to outperform global equity markets.

-The ASX200 gained 6.9% (total return) during March
-Value continued to outperform Growth
-Strong gains for resources and banks
-The CRB Commodity Index rose by 9.7%
-Australian 10-year bond yields climbed by 69 basis points to 2.83%

Mark Woodruff

The ASX200 closed out March with a total gain of 6.9% (including dividends) and continued to outperform global indices.

For the year-to-date, the total gain for the ASX200 has been 2.2%, and at the end of March the index was within -2% of its August 2021 all-time high. Meanwhile, the S&P500 in the US has lost -4.6% so far in 2022.

The March performance of the ASX200 also exceeded the S&P500, which gained 3.7%. Developing Markets closed up 2.2% (in US dollar terms), reversing year-to-date trends, while the MSCI China index lost -7.7% and Emerging Markets overall lost -2%.

Since Russia’s invasion of Ukraine, investors have rotated to markets with both a high commodity exposure and strong governance, points out Macquarie. Thus, Australian equities may be benefiting at the expense of markets with higher geopolitical risk, such as China, and/or net importers of commodities, like Europe.

In Australia, Value outperformed Growth by 3 percentage points (ppt) in March and 15.7ppt in the first quarter of the year. Macquarie attributes this outperformance to strong gains in Resources and Banks, while a rise in bond yields and a stronger Australian dollar were likely headwinds for your typical Growth stocks.

In looking forward, the broker feels current conservatism in 2023 forecasts for Resources will sustain an earnings upgrade cycle, and points out global investors are more likely to focus upon large-cap names.

Overall, large-caps were preferred in March over small and mid-cap alternatives. Morgan Stanley notes small caps have a greater exposure to Real Estate and Discretionary, relative to large caps.

Meanwhile, Resources outperformed Industrials across all size-biased indices. Ongoing strength for Resources and Banks accounted for close to two-thirds of the overall monthly return. Nevertheless, Technology, recovering from heavy sell-offs earlier in the quarter, was the best performing sector (up 13.2%), followed by Energy (9.8%) and Utilities which gained 7.6%.

Macquarie highlights strong returns from the Technology sector have less impact on the overall market return as the sector accounts for less than 4% of the ASX200 index compared to 28% for the S&P500.

The Real Estate sector still managed a gain of 1.5%, despite being the worst performing sector in March due to a rise in bond yields. In Australia the10-year bond yield climbed by 69bpts to 2.83% while the US 10-year treasury yield rose by 49bpts to 2.32%.

Best and worst shares across indices

Within the ASX50, shares with the highest returns included Block Inc ((SQ2)) with 19.3%, Computershare ((CPU)) 14%, Fortescue Metals Group ((FMG)) 13.8%, Commonwealth Bank of Australia ((CBA)) 13.2%, Seek ((SEK)) 12.7% and Woodside Petroleum ((WPL)) with a return of 12.5%.

Underperformers within the ASX50 were James Hardie Industries ((JHX)) which lost -9.1%, Insurance Australia Group ((IAG)) -4.8%, Mirvac Group ((MGR)) -3.95%, Amcor ((AMC)) -3.5%, ResMed ((RMD)) -2.9% and Aristocrat Leisure ((ALL)) which lost -1.5%.

For the Mid-Cap50 the highest return was achieved by IGO Ltd ((IGO)) with 29.1%, then came Allkem ((AKE)) 26%, Incitec Pivot ((IPL)) 22.7%, IDP Education ((IEL)) 20.8%, Pilbara Minerals ((PLS)) 18.1% and WiseTech Global with a return of 17.3%.

On the flipside, Magellan Financial Group ((MFG)) lost -13.4%, Fisher & Paykel Healthcare ((FPH)) -12.5% (following a profit warning), Virgin Money ((VUK)) -9.4%, Reliance Worldwide ((RWC)) -6.2%, a2 Milk Company ((A2M)) -5.3% and Star Entertainment Group which lost -3% on further regulatory scrutiny (including damning revelations).

The Small Ordinaries Accumulation Index rose by 5.5% in March, underperforming the ASX100 by -1.9ppt.

Within the index, the Small Industrial Index rose 3% though underperformed the ASX100 Industrials Index by -3.1ppt. Meanwhile, the Small Resources Index jumped by 12.7%, outperforming the ASX100 Resources Index by 2.8ppt.

The best performing sectors were Energy which gained 12.1%, Materials 10.8% and Telecommunication Services which gained 8.4%. The worst performing sector was Financials which lost -0.6%, Consumer Discretionary gained 0.7% and Consumer Staples which also gained 0.9%.

Outperformers included AVZ Minerals ((AVZ)) which gained 56.3%, Uniti Group ((UWL) 41%, Liontown Resources ((LTR)) 31%, Whitehaven coal ((WHC)) 29.3%, Calix ((CXL)) 26%, EML Payments ((EML)) 24.9%, Nearmap ((NEA)) 24% and Novonix ((NVX)) gained 23.3% .

Underperformers included Zip Co ((Z1P)) which lost -32.8%, Fineos Corp ((FCL)) -25%, SiteMinder ((SDR)) -24%, Nickel Mines ((NIC)) -17%, Telix Pharmaceuticals ((TLX)) -15.4%, Sandfire Resources ((SFR)) -14.8%, City Chic Collective ((CCX)) -13% and United Malt Group ((UMG)) which lost -10.8%.

Australian banks

The 9.3% average total shareholder return of the major banks was better than the 6.9% total return for the ASX200 in March.

Commonwealth Bank of Australia and National Australia Bank ((NAB)) returned 13.2% and 11.8% while ANZ Bank ((ANZ)) and Westpac Bank ((WBC)) had a total return of 6.1% and 6.3%, respectively.

Among the regional banks, Bendigo & Adelaide Bank ((BEN)) and Bank of Queensland ((BOQ)) also outperformed, with returns of 10.2% and 8.5%.

The performance of banks for the March quarter compares very favourably with the 2.2% total gain for the ASX200. Over this period, Bendigo & Adelaide Bank returned 16.4%, Westpac Bank 13.5%, National Australia Bank 12.2%, Bank Of Queensland 7.3%, Commonwealth Bank 6.6%, while laggard ANZ Bank returned only a measly 0.3%.

Morgan Stanley believes valuations for the banks still remain supportive given the improving margin outlook, dividends are growing and buybacks should continue. Additionally, loan growth is reasonable and credit quality is expected to prove resilient.

Australian financials ex-banks

Despite 14% and 13% returns for Computershare and Macquarie Group ((MQG), the Australian Financials Ex-Banks sector mostly lagged the ASX200.

Underperformers included Magellan Financial Group which lost -12% due to continued large fund outflows and a -5% return for Insurance Australia Group ((IAG)) on higher costs for catastrophe insurance.

Technology sector

Despite losing -16% in the year-to-date, the Australian All Technology Index gained 9% in March and appears to have found a bottom, according to Ord Minnett. It’s felt the market has had time to incorporate fears around geopolitical risk, supply chain disruption and rising interest rates.

The broker notes the relative outperformance of the software-as-a-service and cloud-linked stocks under its research coverage, and attributes this to more durable business models and higher potential growth rates.

Volatility during March remained high, notes Ord Minnett, with more than half of the trading days for the month experiencing moves of 2% or more for the All Technology Index.


Given the Australian 10-year bond yield rose to levels last seen in May 2018, Credit Suisse points out REITs proved relatively resilient in gaining 1.9% during March.

The broker, while not having a simple all-in-one answer, attributes the resilience to fairly predictable earnings and in some cases an expectation for an earnings recovery upon the post-covid reopening. In addition, it’s thought the sector may be benefiting from a rotation into Australia, given geopolitical concerns in other regions.

At current levels, Credit Suisse prefers Stockland ((SGP)) among diversified large-caps, and also sees value in Mirvac Group ((MGR)).

The analyst likes Charter Hall Group ((CHC)) and Goodman Group ((GMG)) in the fund manager space and Scentre Group ((SCG)) among large-cap retail.

For yield-focused investors, Credit Suisse also sees value in RAM Essential Services ((REP)) and Centuria Office REIT ((COF)), while for value-focused investors with a longer term horizon Lendlease ((LLC)) is recommended.

Interest rates

In the US, the 10-year treasury yield rose by 49bpts to 2.32%, while in Australia the 10-year bond yield climbed by 69bpts to 2.83%.

In the US, futures market pricing shows an expectation for ten rate hikes by the Federal Reserve over the next 12 months, up from an expectation for seven moves last month. Markets are also pricing steep rate hikes by the Reserve Bank of Australia (even more aggressive vis a vis the US).


The CRB Commodity Index rose by 9.7% to 295.2 in March.

Brent crude oil increased by 6.9% to US$107.9/bbl.

Iron ore prices jumped by 13.6% to $US158.5/t.

The gold price increased by 1.5% to US$1,937.4/oz.

Hard coking coal continued its uptrend with a 28% rise, while thermal coal slipped by -5.6% during March.

Foreign exchange

The US dollar Index (DXY), a measure of the value of the US dollar relative to a basket of foreign currencies, closed up 1.7% to 98.31.

The Australian dollar rose by 3% to close out March at US74.82 cents. Macquarie believes the rise was mostly attributable to the rise in commodity currencies generally, though the Australian bond yield spread versus the US also widened in March compared to February.

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