IN 2012, the Australian sharemarket turned in its best performance since 2009 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", 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," Mr James said.
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 down the market in the first half, Arab Bank Australia treasury dealer David Scutt said.
"It really was a tale of two halves," he said. "Once we saw the European market come down and saw 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 has 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. Growing just under 200 per cent was biotech Sirtex Medical, while electrical appliance maker Breville came in third with an upward shift of 143 per cent.
Pharmaceuticals company CSL rounded up the top 10 best performers with a 68 per cent rise in its shares.
The total return on shares this year was about 19 per cent, far ahead of 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 between 2 and 3 per cent, he said.
Looking at the industry sectors, the search for returns - which extended beyond share price accumulation to include dividends - was "very much a theme" this year, Mr James said. "It seems that a more defensive-type strategy won the year in areas like healthcare, food, beverage and tobacco and telecommunications."
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 their 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 at the end of the day."
Also boosting the market for 2012 was the Reserve Bank's easing of monetary policy, while the dollar remained stronger but only fractionally higher for the year, limiting its negative impact on Australian companies, Mr Scutt said.