After some promising gains in the first part of 2010 the Australian stock market closed down today to finish the year basically unchanged. In plain English the share market essentially did nothing in 2010 and so if the Australian economy is really booming, then this is not being reflected in the performance of the ASX All Ordinaries or S&P/ASX 200.
The last time I focused on the 52 week stock price high/lows was in August, since then the market has crept up only around 400 points, much of this thanks to the mining stocks.
I had expected a better performance from Australian stocks this year but two major events have kept the market subdued in my opinion:
1. The mining tax debacle which has caused international fund managers to be wary of investing in Australia and;
2. The uncertain political landscape created after the removal of Kevin Rudd as Prime Minister and the close federal election result in late 2010.
I reckon these two issues alone have probably put a drag of around 500 points on the All Ords/ASX 200 – though that is very much a guesstimate of the highest order.
But rather than me starting another rant about how badly managed the mining tax issue has been or how little faith I have in the ALP/Greens alliance getting anything done in 2011 let’s have a look at some stocks and see how they have been tracking since August.
52 Week Stock Prices Highs/Lows
(Last trade/closing prices as of 31st December 2010)
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A closing price in green means the stock is trading higher than last time a check of 52 week stock prices was undertaken. (February 2010) A closing price in red means the stock price has fallen over the same period. A figure in black means the share price is approximately the same as the last review.
Looking at the table above we can see that generally speaking the banks have fallen backwards, the miners have risen and the defensive type stocks like Woolworths and Domino have held up pretty well.
Remember that in general even in a recession, people need to eat and buy groceries so companies in this area tend to do better than say firms that sell things we can do without such as a flatscreen TV’s. Hence the reason Harvey Normal shares are not doing well and Gerry Harvey has been spitting the dummy about online retailers.
It’s not much point reading too much into the Telstra share price since the company is caught up in Senator Conroy’s National Broadband Network (NBN) debacle. It seems being a blue-chip Australian company is risky business this days as the banks and miners are also in the Government’s firing line.
I know it’s popular to pile scorn on company’s that make big profits but what would people prefer..companies that lose money? Listed companies in Australia that make big dollars pay big taxes and return money via dividends, salaries, capital investment and bonus payments etc. If we want the economy to grow then companies need to make profits, it’s pretty simple.
Besides, if people want to tap into company profits more directly then they could buy shares rather than taking an overseas holiday. That’s the way free markets work. Being investor is often better than just being a consumer.
The listed investment/wealth management companies in the table above have had a pretty poor year after starting off well in early 2010. It doesn’t look like much money is flowing into stocks and with interest rates high, I doubt many people are too keen to take out a margin loan to boost their shares portfolio.
All in all I would say that the performance of the stocks above reflects what is happening across the wider Australian economy in that basically only the mining companies seem to have had a reasonably good 2010.
Anyway that is it from me for 2010. Happy New Year to all and let’s worry about stocks again sometime in January!