Key index dips but stays above 4300

THE sharemarket this week hit its highest level of the year, finally leaping - and confidently staying above - the 4300 points barrier on the benchmark index. It

By InvestSMART · 31 Mar 2012

By InvestSMART ·
31 Mar 2012

Comments

THE sharemarket this week hit its highest level of the year, finally leaping and confidently staying above the 4300 points barrier on the benchmark index. It

capped the best quarterly start to the year for the sharemarket since 2006.

For the week, the index was up 95.57 points, or 2.3 per cent, hitting 4343.5 points on Wednesday, the highest close for the year.

The S&P/ASX 200 Index yesterday edged down 2.7 points to finish at 4335.2.

For the quarter, the sharemarket has gained 6.9 per cent, helped largely by the big banks: the biggest contributors to the rise were ANZ (about 10.8 per cent of the rise), Westpac (8.9 per cent), National Australia Bank (4.5 per cent) and Fortescue Metals (4 per cent).

Looking at the charts, since the sharemarket's low on September 26 last year the S&P/ASX 200 has risen by about 12.6 per cent.

That might seem quite impressive but in that time the Dow Jones Industrial Average has put on 23.4 per cent and the S&P 500 has surged 27.7 per cent.

Fund managers said it would take a lot more for the Australian market to move substantially higher.

"Our two major mining stocks - BHP Billiton and Rio Tinto - are still in very depressed levels, for various reasons," said SG Hiscock & Co portfolio manager Rob Tucker.

"So if you're going to see the market move higher you'd have to see them do a fair bit of the work. And that then revolves around China . . . that is what's going to drive the index materially higher, given the domestic economy and other index heavyweights (i.e. banks) still have to deal with a very soft growth outlook."

This month we also saw the dollar fall below $US1.04, from US1.08, as the inverse relationship between the sharemarket and the currency became apparent.

Currency strategists said the thing that really started to push it down was China announcing a lower annual growth forecast, from 8 per cent to 7.5 per cent odd, given that China's five-year plan, which was out about five months earlier, had a target of 7 per cent.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What happened to the S&P/ASX 200 this week and did it stay above 4300 points?

This week the S&P/ASX 200 hit its highest level of the year and confidently stayed above the 4,300 points barrier. The index was up 95.57 points (about 2.3%) for the week, peaking at 4,343.5 on Wednesday and finishing at 4,335.2 after edging down 2.7 points.

How much did the Australian sharemarket gain for the quarter and is this a strong start to the year?

For the quarter the sharemarket gained 6.9%, marking the best quarterly start to the year for the market since 2006, according to the article.

Which companies were the biggest contributors to the S&P/ASX 200 rise this quarter?

The biggest contributors to the rise were the major banks and a resources player: ANZ (about 10.8% of the rise), Westpac (8.9%), National Australia Bank (4.5%) and Fortescue Metals (4%).

How has the S&P/ASX 200 performed since its September low compared with US markets?

Since the sharemarket low on 26 September last year the S&P/ASX 200 has risen by about 12.6%. By comparison, over the same period the Dow Jones Industrial Average rose about 23.4% and the S&P 500 surged about 27.7%.

What are fund managers saying about the outlook for the Australian market?

Fund managers say it will take a lot more for the Australian market to move substantially higher. They note key Australian mining stocks like BHP Billiton and Rio Tinto remain at depressed levels, and that any material upside is likely tied to a recovery in those miners and stronger demand from China.

How does China’s growth forecast affect the Australian sharemarket and investor sentiment?

China is seen as a major driver for the Australian market because mining stocks are sensitive to Chinese demand. The article notes China lowered its annual growth forecast from 8% to 7.5%, a move cited by strategists as influential on both the market and the currency.

Why did the Australian dollar fall and what is the relationship between the sharemarket and the currency?

The Australian dollar fell from about US$1.08 to below US$1.04. The article highlights an inverse relationship between the sharemarket and the currency, and currency strategists pointed to China’s lower growth forecast as a key reason pushing the dollar down.

What should everyday investors watch right now according to the article?

Everyday investors should watch the performance of the major miners (notably BHP Billiton and Rio Tinto), Chinese growth signals, and the big banks’ outlook—these factors are flagged in the article as central to whether the ASX can move substantially higher beyond recent gains.