Hope Rising That This Is The Year Of The Bull
The Age
Tuesday July 1, 2003
Stockbrokers, fund managers and investors yesterday filed away forever their many trading follies for the 2002-03 financial year and opened up a fresh copy book, hoping the new financial year, which starts today, will mark a return of a bull market.
Fund managers and professional investors contacted by The Age were slightly upbeat about the year ahead, with many tipping earnings growth for Australian equities (apart from banks, resources and News Corporation) of 8 per cent.
Most tipped infrastructure plays, engineering and steel producers as the companies to watch in 2003-04 because companies in this field should have their earnings underpinned by large construction projects and a robust domestic economy.
Many also believe that most of the welter of profit downgrades that caused well-known blue chips to implode should be behind the market and that industrials are in good shape for the future.
Last year's horror run on the Australian sharemarket has created negative returns for most funds, as blue-chip stocks and penny dreadfuls sank in the face of an uncertain global economic and political outlook and the appreciating Australian dollar.
The sharemarket's best-performing sector in 2002-03 was the S&P/ASX 200 Utilities Index, reflecting investors' flight to quality - stocks that delivered sustainable earnings and strong dividend yields.
The index, which includes stocks such as AGL, AlintaGas and GasNet Australia, rose 15.5 per cent for the year to June 30, with a huge chasm between it and the second-placed sector, the ASX 200 Consumer Discretionary Index, which rose a modest 2.6 per cent.
The rest of the Australian sharemarket's benchmark indices were in negative territory, with volatile dotcoms and biotech stocks making their respective sectors the worst results for 2002-03. The ASX 200 Health Index dropped 21 per cent while the ASX 200 Information Technology Index slumped an earth-shattering 40.57 per cent.
Retractable syringe maker Unitract bucked the health sector trend. Its shares, offered to the public at 20 in November, ended the year at $2.36, a gain of 1080 per cent.
Perennial Growth partner Adrian Mulcahy said many of the stocks that collapsed during the year were victims of their own problems rather than wider economic ills. ``It was usually a problem of their own making, such as poor management decisions and risky offshore expansions," he said.
Mr Mulcahy said he was optimistic about the outlook for equities in 2003-04, tipping earnings growth of 8 per cent not counting banks, resources and News Corp.
``I think this is pretty reasonable and, even if that figure is revised during the year, it won't come back a long way."
Zurich Financial Services investments director Matthew Drennan said infrastructure and engineering stocks should perform extremely well this year.
``Many of these companies are working on large projects where the work is being underpinned by the federal or state governments and includes projects such as roads," he said.
Mr Drennan forecasts a forward price-earnings ratio of 13 to 13.5 for industrial stocks. ``This is very reasonable and not a bad starting point for the year and investors," he said.
FRANK GOOCH, CEO, MILTON CORPORATION
Infrastructure and utility stocks, companies in the engineering sector and steel producers.
ADRIAN MULCAHY, PARTNER, PERENNIAL GROWTH
Companies with large offshore exposure, especially big established mining companies.
MATTHEW DRENNAN, DIRECTOR OF INVESTMENTS, ZURICH FINANCIAL SERVICES
Qantas, QBE Insurance, construction and engineering companies such as
Leighton Holdings, Downer EDI and infrastructure stocks.
PERFORMANCE OF KEY ASX SECTORS 2002-03
ASX 200 Utilities Index Up 15.5%
ASX 200 Consumer Discretionary Index Up 2.6%
ASX 200 Energy Index Down 3.31%
ASX 200 Telecom Index Down 3.8%
ASX 200 Materials Index Down 4.38%
ASX 200 Consumer Staples Index Down 4.61%
ASX 200 Financials Index Down 6.66%
ASX 200 Industrials Index Down 15.88%
ASX 200 Health Index Down 21%
ASX 200 Information Technology Index Down 40.57%
AUSTRALIAN SHARES v THE WORLD
Australian shares Down 1.7%
International shares Down 17.8%
Listed property Up 12.1%
Australian bonds Up 9.8%
International bonds Up 12.1%
Cash Up 4.9%
AUSTRALIAN SHAREMARKET: THE NUMBERS
2002-03 2001-02 CHANGE
Total market capital $682 billion $701 billion Down 2.7%
Market liquidity 80% 72% n/a
Number of transactions 13.87 million 14.17 million Down 2.1%
Average daily transactions 54,822 56,241 Down
2.5%
Turnover: volume 156.8 billion 150.8 billion Up 4%
Turnover: value $535 billion 518.9 billion Up 3.1%
SOURCE: BLOOMBERG AND ASX, J BOWMAN/THE AGE 1/7/2003
© 2003 The Age
