November In Review: Third Consecutive Down Month For Equities 

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Losses in the energy and financial sectors outweighed materials and communication services gains leading to a -0.54% total decline for the ASX200 in November, as volatility increased with news of a new covid variant.

-The ASX200 lost -0.54% (total return) during November
-Growth outperformed Value 
-Materials was the best performing sector while Energy was the worst
-REITs climbed by 4.5% in November
-Australian 10-year bond yields fell by -40 basis points

Mark Woodruff

The ASX200 closed out November -0.54% lower on a total return basis (including dividends). This is the third consecutive month of losses after declines in September and October of -1.9% and -0.1%, respectively.

Volatility spiked on global markets in the final days of the month following the discovery of the potentially more transmissible omicron covid variant.  Moreover, on the last day of the month, Chair of the Federal Reserve Jerome Powell signalled tapering may be accelerated as inflation is less transitory than first thought.

In local currency terms, the MSCI World Developed Market World index decreased by -1.4% though outperformed the Emerging Markets index, which fell by -3.2%. The ASX200 slightly outperforming the S&P 500 in the US, which fell by -0.7% for the month. 

In Australia, Growth outperformed Value by 6.6% in November. Value is now underperforming growth in the year-to-date in all regions bar Emerging Markets. This is largely due to flattening yield curves and moderating growth expectations, explains Ord Minnett.

The broker is forecasting a return of the underlying conditions that drove the November-20 to June-21 curve steepening, which should serve as a positive catalyst for the Value and Cyclical categories and provide a headwind for Growth stocks.

The Materials sector was the best-performing and rose by 6.3%, as investors positioned for an easing in China, according to Macquarie. The gains were led by iron ore stocks with Fortescue Metals Group ((FMG)) rising by 22.1%, and new energy stocks such as  Lycopodium (LYC)) and Pilbara Minerals ((PLS)) which climbed by 21% and 18.2%, respectively.

Communications Services was the next best performing sector rising by 5.2% while Energy fell -8.3%, as oil prices retraced due to demand uncertainties posed by omicron, notes UBS.  Financials also declined by -6.9% in response to the bank reporting season.

Mid-caps were preferred over small and large-caps, while Resources outperformed Industrials across the range of indices.

The October sell-off in bonds was reversed in November, as omicron headlines drove investors to scale back inflation and rate hike expectations.

ASX100 best and worst

The best performing ASX100 stocks during November were Fortescue Metals, which shot up by 22.1%, Reece ((REH)) 17.7% and Mineral Resources ((MIN)) increasing by 17.3% 

The worst performers were Westpac Bank ((WBC)) after falling by  -17.9%, Beach Energy ((BPT)) -15.1% and Bank of Queensland ((BOQ)), which declined by -13.2%. 

Among the Small Ordinaries, the best performers were EML Payments ((EML)), which jumped 22%, Capricorn Metals ((CMM)) 18.7% and Aurelia Metals ((AMI)) which increased by 3.2%.

The worst performers were Clinuvel Pharmaceuticals ((CUV)), which fell -25.5%, Electro Optic Systems ((EOS)) -22.6% and Humm Group ((HUM)), which fell by -17.1%. 

Emerging companies

The Small Ordinaries Accumulation index fell -0.3% in November, outperforming the ASX100 by the same margin.

The Small Industrials Index declined -1.4%, in line with the ASX100 Industrials, while the Small Resources Index rose 3.6%.

The best performing sector in November was Information Technology, which jumped  6.7%, followed by Materials 3.7% and Telecommunication Services up by 1.3%. Meanwhile, Energy was the worst performing sector returning -3.7%, followed by Industrials -3.2% and Consumer Discretionary falling by -3.0%.

For individual stocks, the best performers were Novonix ((NVX)), which catapulted up by 63%, Brainchip Holdings ((BRN)) 32%,  EML payments 23%,  Megaport ((MP1)) 20.6%, Pro Medicus 18.7% and Dubber Corp increased by 18.5%.

The worst performers were Tyro Payments ((TYR)), which fell by -27.3%, Nearmap ((NEA)) -26.2%,  Nuix ((NXL)) -25.2%,  BetMakers Technology Group -24.8% and Clinuvel Pharmaceuticals, which declined by -24.1%.

Consumer Sector

Within the Australian Consumer sector for November, Staples climbed by 4.4% and Discretionary fell by -1.2%.

Heading into the holiday season, Macquarie expects consumer confidence to improve, with a watching brief on the omicron variant. The broker maintains its Outperform ratings for Coles Group ((COL)), Harvey Norman ((HVN)), JB Hi-Fi ((JBH)) and Collins Foods ((CKF)).

During November the outperformers in the Discretionary sector included Collins Foods and ARB Corp ((ARB)), which both rose by 10%, and Wesfarmers ((WES)) increased by  3%.

On the flipside, Kogan.com ((KGN)) fell by -20% and Redbubble ((RBL)) went down by -15%.

The best performers in Staples were GrainCorp ((GNC)), rising by 10%, Woolworths Group ((WOW)) 7%, Coles Group 5% and Treasury Wine Estates ((TWE)), which also increased by 5%.

Meanwhile, Inghams Group ((ING)) fell by -7%, while the a2 Milk Co ((A2M)) and Elders ((ELD)) both declined by -5%.

REITs

Real Estate Investment Trusts outperformed the broader ASX200 during the month, rising by 4.5%.

According to Credit Suisse, the sector benefited from a circa -40 basis point decline in the Australian 10-year bond yield, as well as earnings upgrades from Charter Hall Group ((CHC) and Goodman Group ((GMG)).

Investors are attempting to identify which REITs win or lose from inflation, and the effect of rising wages and input costs upon a given REIT’s ability to pass on rental increases or development margins, explains the broker.

At this point, Credit Suisse does not see any stand out value for REITs under its coverage.

Nonetheless, the broker pinpoints Mirvac Group ((MGR)) as a favourite among its large-cap diversified universe, and sees value emerging in Stockland ((SGP)). In retail, Charter Hall Retail REIT ((CQR)) is still favoured for its neighbourhood exposure, while Scentre Group ((SCG)) is preferred for a weighting toward shopping malls.

Within the small-to-mid cap space Credit Suisse feels value in Centuria Office REIT ((COF)) has re-emerged, after a month of relative underperformance.

Outperformers for the month included Goodman Group which jumped by 12.7%. Charter Hall Group 11.5%, Rural Funds Group ((RFF)) 6.5%, National Storage REIT ((NSR)) 6.2% and Dexus Convenience Retail REIT ((DXC)) which climbed by 4.1%.

Underperformers for the month included Waypoint REIT ((WPR)) which fell by -11.7%, Home Consortium ((HMC)) -8.3%, GDI Property Group ((GDI)) -6.8%, Centuria Office REIT -6.2% and HomeCo Daily Needs REIT ((HDN)) which fell by -4.5%.

Commodities

The CRB Commodity Index fell by -7.8% to 219 in November.

Brent crude oil declined by -16.4%% to US$70.6/bbl.

Iron ore prices fell by -6.6% to $US105.5/t.

The gold price declined by -0.5% to US$1,774.5/oz.

Hard coking coal and thermal coal fell by -13.2% and -32%, respectively, while uranium was flat at US$43.1/lb.

Interest Rates

In the US, 10-year bond yields fell by -11 basis points to 1.44%, while in Australia 10-year bond yields fell -40 basis points to 1.69%.

Foreign Exchange

The US dollar Index (DXY), a measure of the value of the US dollar relative to a basket of foreign currencies, closed up 2% to 95.99.

And finally, the Australian dollar fell by -5.5% to close out November at US71.27cents.

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