End of financial year wrap

31 Jul 2015

By Shadforth Financial Group

​Late selling in May and June saw the Australian share market, as measured by the S&P/ASX 200 Accumulation index, end the 2015 financial year 5.7 per cent higher.

There were mixed performances during the year, with the industrial sector (+11.2 per cent) outperforming the resource sector (-16.6 per cent), while small caps underperformed the broader market with a return of 0.4 per cent.

The table below shows the returns of the various Global Industry Classification Standard sectors for the financial year.

ASX sector 1 year return table 

Source: IRESS

The resource sector came under pressure due to weakness in commodity prices, led by a sharp fall in the iron ore price from US$93 to below US$50 per tonne. This has seen some of the smaller iron ore producers cease production as prices fell below their cost of production. Despite their dominant market positions and world-class assets, BHP Billiton (-16.8 per cent) and Rio Tinto (-9.4 per cent) finished the year in the red.

The energy sector was the worst performing sector, as a lower oil price and concerns about balance sheet strength impacted share prices. Woodside Petroleum fell 16.7 per cent, Oil Search reversed 26.3 per cent and Santos shed 45.1 per cent.

The banking sector was sold off late in the financial year due to concerns about the need for the banks to raise additional capital to meet new capital requirements. This saw National Australia Bank raise $5.5 billion via a capital raising, while Westpac raised capital via the sell-down of its stake in BT Investment Management. Commonwealth Bank (+5.3 per cent) was the best performer, followed by National Australia Bank (+3.1 per cent), ANZ (-3.4 per cent), and Westpac (-5.1 per cent).

In the supermarket sector, Woolworths (-23.4 per cent) lost ground as the company continues to struggle to reignite sales growth following strong competition from Coles and Aldi. Woolworths downgraded guidance and commented that new cost savings will be reinvested back into lower shelf prices in the supermarket business. Coles owner Wesfarmers fell 6.5 per cent over the 12 month period.

The health care sector was the best performer for the year, benefiting from exposure to the recovering global economy and the translation benefits from the falling Australian dollar. Sirtex Medical (+72.1 per cent), Ramsay Health Care (+35.1 per cent), ResMed (+32.7 per cent), and CSL Limited (+30.0 per cent) were the standouts.

The telecommunication sector benefited from a solid gain by market heavy weight Telstra (+17.8 per cent), while smaller players such as M2 Group (+85.1 per cent) and TPG Telecom (+62.8 per cent) delivered strong gains.

Qantas Airways was the best performing stock in the S&P/ASX 100 index with a return of +150.8 per cent, with the company benefiting from the sharp fall in the oil price, favourable market conditions and cost cutting measures.

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