While investing time to watch the Wallabies over recent years has not yielded much of a return, we here at Milford do invest time on Australian stocks.
The Australian Stock Exchange (ASX) has a market capitalisation of over A$1.7t which is slightly larger than the country’s GDP. There were 2,116 companies listed at the end of August which included 131 foreign based companies. This provides plenty of opportunities to invest across a broad range of sectors and size.
The two key indices used to track performance are the All Ordinaries Index and the S&P/ASX 200 Index. The ASX 200 is the preferred measure as it looks at the largest and most liquid 200 stocks on the ASX. The “free float” of the ASX200, after omitting large strategic shareholders, is A$1.5t so it represents the vast bulk of the ASX.
The chart below gives the current breakdown by sector
The banks certainly do dominate with almost 30% of the index. These high dividend paying stocks give great exposure to the Australian and New Zealand economies.
Mining plays a big part in the ASX and has delivered stellar returns since early 2016 when China recovered from its slowdown. Miners give exposure to a range of commodities from iron ore to gold to copper to lithium and beyond. Asian demand plays a big part here.
Another advantage of the ASX is the large amount of stocks that have earnings from offshore. Most sectors have companies with significant earnings from places like the US and Europe, allowing exposure to the economic growth of these countries.
Stocks include James Hardie and Boral (both materials), Oil Search (energy), CSL (healthcare), Treasury Wine Estates (consumer staples) and Brambles (industrials). Many of these stocks have experienced tremendous growth over the years and we largely expect them to continue to do so.
This scale and diversity of the ASX allows an exposure to a wide range of investment opportunities so investing across The Ditch can broaden your investable universe and participate in global growth.