CONCERNS about China's growth, the strong dollar and the lacklustre outlook for banks combined to make the local sharemarket one of the global laggards last month.
The S&P/ASX 200 Index rose a modest 0.8 per cent, placing it well behind the Nikkei in Japan, which jumped 10.5 per cent and the Hang Seng in Hong Kong, which rose 6.3 per cent, on growing optimism for the health of the global economy.
The market's underperformance extends a year-long run in which the ASX 200 has lost 11.5 per cent compared with the Dow Jones index, up 7.4 per cent or the Nasdaq, up 8.3 per cent.
Even among falling markets, the ASX has dropped more than most, with the Nikkei down only 9.2 per cent in the year, and the Hang Seng shedding 7.7 per cent.
"The Aussie sharemarket is very heavily weighted to resource and financials and rightly or wrongly there are growing doubts among investors about whether China can grow at 8 per cent per annum," the head of research at Bell Potter Securities, Peter Quinton, said.
China's economic growth slowed to 8.9 per cent in the year to December, from 9.1 per cent in the year to September, with authorities pledging to maintain growth above 8 per cent despite fears among global investors that China is due for a sharp downturn.
The earnings growth for banks is expected to remain weak in the next year as households reduce their borrowing and many parts of the domestic economy miss out on the benefits of the boom in the mining industry.
"Every time you talk to a foreign investor, they either mention all of those things, or one of them [in relation to local stocks]," Mr Quinton said.
The ASX 200 has got off to a slow start this month, led lower by mining stocks. The HC Securities director Luke Cummings said the index remained under a cloud for that reason as well as the strength of the dollar, which is putting pressure on earnings of companies that rely on exports and also having a similar effect on businesses focusing on the domestic market.
"DJs, Myer are being killed by the ability for consumers to buy overseas products online and have them shipped to Australia," Mr Cummings said.
The Australian dollar rose to US$1.07 over the month from US$1.06, helped by the Reserve Bank's surprise decision to keep rates on hold.
"I think the strength of the Aussie dollar has been the main issue and will probably continue to be for some time," Mr Cummings said.