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September, 2018 3:13 PM



ASX posts solid FY returns despite turmoil

ASX posts solid FY returns despite turmoil

Despite global uncertainty over an international trade war, Australian shares have performed well in the past financial year.

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By AAP 29.06.2018 04:04 PM

The Australian share market's recent improvement means it still rewarded investors over the past financial year, despite global turmoil over unpredictable US policy, fears over North Korea, uncertainty in Europe, and growing fears of a global trade war.

Even the ongoing royal commission into the local banking sector could only slow rather than halt the overall positive momentum as the ASX200 lifted by about seven per cent over 2017/18.

The broader All Ordinaries index gained almost eight per cent over what AMP Capital chief economist Shane Oliver called a "pretty solid year".

Dr Oliver is predicting another 12 months of solid, if unspectacular, returns on the local bourse.

"I don't think we're about to plunge into a global recession, but I doubt we'll see another year of double digit returns," he said.

The local market finished 2016/17 in a strong position as Wall Street lifted on hopes for a tax cut from US President Donald Trump's administration.

But global uncertainty as Italy struggled to form a government, fear grew over the prospect of a nuclear incident involving North Korea, and the US and China entered an ongoing tariffs battle led to a plunge on the ASX from January to March.

But recent rises oil and commodities prices pumped energy and mining stocks, while retails shares soared as the federal Coalition government's $144 billion income tax cuts package cleared Parliament in June.

"The ASX 200 has relatively underperformed until recently, but has picked up in the last month," Dr Oliver said.

Energy shares were the best performing over the past year, up about 38 per cent, while mining stocks had also fared well.

"The energy sector has really benefited from high oil prices, while the miners have seen commodities prices higher than expected," Dr Oliver said.

Banking stocks have been dented by the ongoing banking royal commission and slow growth, but the telco sector was the biggest loser from this time last year, down about 34 per cent as Telstra and Vocus both struggled to deal with the national broadband network and increased competition.

"That's been the most surprising," Dr Oliver said.

Telstra stocks plummeted from $4.30 to $2.60, and the telco's recent shock move to slash 8,000 jobs has not steadied the ship.

Looking ahead, Dr Oliver says commercial property may tempt investors who are concerned there is no money in government bonds and the real estate market slowing down.

"It's done well with around 10 per cent to 16 per cent returns, and will probably do okay in the next 12 months" he said.

Nonetheless, any investors savvy enough to sink money into Bitcoin rather than the ASX200 a year ago could have banked returns of 130 per cent.

FY18'S BEST PERFORMING ASX SECTORS

* Energy: up 38pct

* Materials: up 25pct

* Health: up 25pct

FY18'S WORST PERFORMING ASX SECTORS

* Telco - down 34pct

* Financials - flat

* Utilities - flat

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