Shares hit decade high
THE Australian stock market is trading at its highest level in close to a decade, breaking through 6000 points for the first time since the global financial crisis.
Investors shrugged off the distraction of the Melbourne Cup and another RBA decision to keep interest rates on hold to drive the ASX 200 index 1 per cent higher to 6014.3 points by the close of trade on Tuesday.
The key local index, which tracks the value of the nation’s 200 largest listed companies, last closed above 6000 points in early January 2008.
US investment bank Lehman Brothers filed for bankruptcy eight months later, marking the start of the global financial crisis.
The local bourse has flirted with 6000 points since then – rising as high as 5996.9 at the start of March 2015 – but never cracked it until Tuesday.
Mining majors BHP Billiton and Rio Tinto helped it break through what has emerged as a psychological barrier among investors.
Shares in BHP Billiton rose above $28 for the first time in more than two years while Rio Tinto changed hands at a sixyear high at $74.74 on the back of a spike in the iron ore price.
Energy firms Woodside, Santos and Origin also headed higher as the price of oil headed higher amid a royal purge in Saudi Arabia.
The move through 6000 points means the ASX 200 is comfortably in a bull market having surged 26 per cent since February 2016, adding 4.3 per cent over the past month.
AustralianSuper chief investment officer Mark Delaney said a pick up in the global economy and equity markets was benefiting local investors.
“We are almost 10 years on from the global financial crisis and we’re seeing synchronised global growth in the world economy at last,” he told Business Daily.
“The Australian equity market has benefited from this better global environment and recently an improving Australian economy.”
Credit Suisse says the ASX 200 will hit 6500 by the end of next year as global GDP growth, a stabilising domestic economy and stronger-for-longer commodity prices underpin healthy company profits.
Fidelity portfolio manager Kate Howitt said investors were witnessing the first period of synchronised global growth in a decade but noted it had been “a long, slow recovery” back to 6000 points.
She also said the current “goldilocks scenario” of markets growing supported by low interest rates would not last.
“Either growth will roll over or central banks will take the punchbowl away by normalising monetary policy.”
Despite its latest gains the local bourse remains well below its all-time peak of 6828.7 points hit exactly a decade ago to yesterday.
While it has risen more than 90 per cent since its GFC low of 3145.5 points reached in early March 2009 it also continues to lag international markets.
Wall Street made back its GFC losses by April 2013 and the S & P 500 is now 65 per cent above its pre-GFC high.
“This reflects that the local market is dominated by the banking and mining sectors, which have not performed as well as the tech sector, which has been the main driver of the US market in recent times,” HSBC chief economist Paul Bloxham said.