Australia, October 28, 2021
Australia’s resources sector has borne the brunt of changing demand dynamics, with Materials dropping from a top performing sector over one year in the June quarter to among the worst over one year in the September quarter, according to Mercer’s Australian Shares Investment Manager Performance Survey.
The third quarter of 2021 continued to be positive for equity markets with the S&P/ASX 300 returning 1.8% and the corresponding S&P/ASX 50 index, 1.1%. Energy and Industrials were the leading sectors delivering 6.2% and 4.5% growth respectively over the quarter, followed next by Communication Services. Over the one-year time horizon the S&P/ASX 300 returned 30.9%, while the ASX Small Ords returned 30.4%.
Ronan McCabe, Head of Portfolio Management for Mercer in the Pacific said the environment in China and the local mergers and acquisitions (M&A) market had driven the peaks and troughs in the last quarter.
“The regulatory crackdown in China and challenges in the Chinese property sector has dampened the demand for much of Australia’s key resources. As a result, iron ore prices plunged causing the Materials sector to lag -13.2 per cent over the quarter. In contrast, reduced output within the Chinese economy and energy shortages have driven demand for coal and natural gas, with the likes of Santos and Woodside performing well,” Mr McCabe said.
“And, it’s been a record year on the M&A front so far in 2021. The last quarter saw some significant deals announced such as the proposed acquisition of Afterpay and the takeover bid for Sydney Airport. Managers that were well-positioned into those names have benefited,” he said.
At an individual stock level, Macquarie Group was the largest stock contributor over the quarter, followed by Sydney Airport, CBA and Wisetech Global.
Over the one-year time horizon:
A recent survey conducted by Mercer on asset allocation intentions by Australian and New Zealand investors representing some A$1.3 trillion in funds under management suggests investors currently have a more “risk-on” attitude. Respondents revealed they were looking to increase their exposure to higher-risk assets, in particular sustainable themed strategies (40%), private debt (30%) and infrastructure (40%). Similarly, investors indicated they planned to reduce defensive assets, including sovereign bonds (53%), inflation linked bonds (30%) and hedge funds (23%).
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