7000 up and counting

Investors take stock as ASX 200 hits all-time high

THE rise of Australia’s benchmark share index through 7000 points will likely prompt some investors to “review their portfolios”, potentially leading to “lacklustre” trading sessions, a leading investment group says.

And risks still abound for the market despite the constructive conditions that have fuelled share prices in recent weeks, fund managers say.

Anthony Doyle, an investment specialist at heavyweight fund manager Fidelity International, said market milestones could have a significant influence “on investor emotion and behaviour”.

While there was little tangible difference between an index at 7000 points compared with 6995 points, it could be “an emotional trigger point to some investors”, he said.

The ASX 200, which broadly tracks the nation’s 200 biggest listed companies, hit the milestone yesterday after the US and China signed a preliminary trade agreement — widely welcomed as a breakthrough following several years characterised by a tense relationship.

Wall Street’s Dow Jones index also notched another record high the previous night, breaching 29,000 points.

Mr Doyle said the ASX 200 reaching 7000 “will likely trigger some investors to review their portfolios, causing them to become more active when it comes to investing”.

Research had found such events could lead investors to sell equities, including highperforming stocks, “as they perceive that the level of the equity market is high”, he said.

A trend towards populism in political globally were among lingering risks for the market, Mr Doyle said.

But tailwinds from both monetary and fiscal policy — low interest rates and government spending respectively — were likely to help.

“We are still positive on the Australian equity market this year,” Mr Doyle said.

Montgomery Investment Management analyst Joseph Kim cautioned that sentiment, rather than fundamental factors, was behind much of the market momentum.

Half-year company results due next month would be telling, shedding light on the health of Australian businesses and the economy, he said.

The 5.3 per cent rise in the ASX 200 this month marks the best new year rally since 1987.

It comes after the index surged 18.4 per cent in 2019.

David Bassanese, chief economist with exchangetraded fund provider BetaShares, said the Australian market had been “pulled along by the global optimism, even though local fundamentals are far more challenging”.