THE Australian sharemarket has turned in its best performance since 2009, rising 14.6 per cent as interest rates fell and investors chased higher-yielding stocks.
The benchmark S&P/ASX 200 index lost some ground in a shortened trading session on Monday, but finished the year 14.6 per cent higher at 4648.9 points in a "good, sustainable performance" that was "not just a one-hit wonder", the CommSec chief economist, Craig James, said.
"The Australian sharemarket had a good year, perhaps not a great year, but certainly a much more positive year for investors."
The search for yields drove the market higher over the second half of 2012, after tight monetary policy settings, a high Australian dollar and concerns over China's economy weighed on the market in the first half, said the Arab Bank Australia treasury dealer David Scutt.
"It really was a tale of two halves," he said. "Once we saw the European market come down and that the Chinese economy appeared to have bottomed out, people switched out of the safety plays and moved into the banks and telcos looking for yields.
"And that's really what's driven the market higher over the second part of the year."
The top mover of the year on the ASX 200 was Maverick Drilling, a diversified oil company with interests in the US, which rose 227 per cent.
Rising just under 200 per cent was biotech firm Sirtex Medical, while shares in electrical appliance group Breville came in third with a jump of 143 per cent.
Biopharmaceutical company CSL rounded up the top 10 best performers with a 68 per cent rise.
The total return on shares this year was about 19 per cent, far ahead of other asset classes such as bonds, which returned about 5 per cent, Mr James said.
Cash returned about 3.7 per cent while the total return on residential property hovered at between 2 per cent and 3 per cent.
Looking across industry sectors, the search for returns - which extended beyond share price accumulation to include dividends - was "very much a theme", Mr James said.
"It seems that a more defensive type strategy won the year, in areas like healthcare, food and beverage and tobacco and telecoms."
Mr Scutt said the financial sector was a standout performer, as investors searched for yields while zero interest rates dominated global economies.
"The yields given [banks'] dividend payouts are significantly above what you see with the cash rate and term deposit rates. And that was really the story of the year.
"These were sometimes yielding in the low double-digits. That's what people were looking for, that's what people wanted and that's what they in essence ended up buying."
Also boosting the market for 2012 was the Reserve Bank's easing of monetary policy, while the Australian dollar remained stronger but only fractionally higher for the year.