CHRIS ZAPPONE June 29, 2012
Resource stocks have been the biggest drag on the ASX 200, which has slumped 11 per cent in the fiscal year that ends today, providing a sober reminder to investors that the commodities boom will not last forever.
Within the ASX 200 index, materials stocks have fallen 28.3 per cent since the end of June last year, amid softer prices and and an uncertain outlook for China's growth.
“Commodities prices have come off the boil quite significantly,” said Matt Sherwood, head of investment market research Perpetual Investments.
Since their peak 14 months ago, commodities prices have fallen about 27 per cent, according to the Reuters Jefferies index.
“The slowdown we're seeing in the Chinese economy is giving investors pause for thought that resources aren't the one-way bet they perhaps thought they were,” Mr Sherwood said. “It's been a bit of wake-up call for investors.”
China's economy has slowed from a pace of 9.6 per cent in the June 2011 quarter to 8.1 per cent in the March 2012 quarter. While the industrialised giant is still growing, worries have emerged about how sustainable the current cycle will be, and the impact that will have on demand for Australian commodities in the years ahead. Adding to the jitters is the European debt crisis, which continues to dog markets and force economists to trim back growth estimates.
Investors have already begun switching out of Australia's two largest miners over the past financial year. Shares in Rio Tinto have slumped 33 per cent over the year to close at $56.50, while BHP Billiton shares were down 30 per cent to trade at $31.45.
The telecoms sector, driven by Telstra, posted the best performance in the year to June 29, up 27.4 per cent in that time. Telstra stock itself is up 32 per cent to $3.69 today.
“Telstra composes a big chunk of the telco industry,” said CMC sales trader Miguel Audencial. “And with the recent rate cuts from the Reserve Bank investors have actually been preferring Telstra because of its dividend yield.”
Telstra's full-year dividend yield is 7.6 per cent, compared to a cash rate of 3.5 per cent. Deposit and savings rates are set based on the underlying level of the cash rate, making them sensitive to the RBA's move.
The performance across sectors this financial year couldn't be more different than the 2010-11 financial year, when resources stocks surged 18.9 per cent, helping the overall index notch up an 8.7 per cent gain.
In 2009-10, information technology stocks increased 22.1 per cent while resources stocks ran up 15.3 per cent. The ASX 200 rose 11 per cent.
In 2008-09, while global markets were in the throes of the initial stages of the financial crisis, materials plunged 35.4 per cent, against a 23 per cent drop for the stock index.
The ASX 200 today closed 49 points, or 0.9 per cent, higher to 4094.
This reporter is on Twitter: @chrizap