April In Review: ASX Defensives Shine

Australia | May 04 2022

While still outperforming global peers, the ASX200 experienced a -0.9% loss (total return) in April as losses in the materials and technology sectors outweighed gains for defensive sectors.

-The ASX200 lost -0.9% (total return) during April
-Growth outperformed Value, while the reverse occurred in the US
-Investors sought out defensive sectors
-The CRB Commodity Index rose by 4%
-10-year bond yields continue to climb in Australia and the US

Mark Woodruff

The ASX200 closed out April with a total loss of -0.9% (including dividends) though Australia maintained performance leadership year-to-date amongst global peers.

The MSCI Developed Markets Index dropped by -6.9%, largely driven by the S&P500 which lost -8.7% as a more Hawkish Fed pushed up real yields. The Emerging Markets World Index lost -3.5%.

In US dollar terms the monthly performance in Australia was in-line with Developed Markets, as a lower Australian dollar dragged down the loss to -6.4%.

Since November 2021 in the US, Value and Defensives have outperformed, while the Nasdaq has underperformed.

Growth outperformed Value in Australia by 2.2 percentage points (ppt) in April, while in the US Value outperformed Growth by 8.6ppt, where the Nasdaq fell by -13.2%. Macquarie points out that while Australian Technology was the worst performing sector in April, it comprises only a small part of the Australian market. Also, the more defensive Growth sectors of Staples and Health outperformed in Australia.

Large caps generally outperformed small caps though stocks within the top 20 by market cap relatively underperformed the top 50 stocks. Resources performed best within small caps, whilst Industrials had the edge in the mid-to small-cap stock universe.

As investors were seeking defensive sectors over the month, Utilities gained 9.3% to be the best performed sector, followed by fellow defensive sectors including Transport (5.4%), Insurance (5.2%) and Staples Retail which gained 4.6%.  The Technology sector lost -10.4%, while Materials and Discretionary lost -4.3% and -3.1%, respectively.

Bond markets saw material moves through April.  Australian 10-year yields climbed as investors priced in aggressive rate hikes beginning at the RBA's May meeting. (Investors were proven correct with yesterday’s 0.25% rate rise).

Meanwhile, commodity prices continue to hold up well relative to other asset classes. During April prices for energy and grains rose, while metals and livestock prices fell.

Within energy, Brent crude oil increased a relatively modest 1.9% though natural gas rose over 30% on supply disruptions. As nuclear power increasingly looks like an alternative to carbon energy sources, Macquarie notes uranium also increased by 48%.

Best and worst shares across indices

Within the ASX50, shares with the highest returns included Ramsay Health Care ((RHC)) which gained 24.5% on take-over interest, Amcor ((AMC)) 10.4%, Origin Energy ((ORG)) 9.8%, Lendlease Group ((LLC)) 9.4%, APA Group ((APA)) 7.7% and Qantas Airways ((QAN)) which gained 7.5%.

Underperformers within the ASX50 were Block Inc ((SQ2)) which lost -21.7%, ResMed ((RMD)) -10.1%, Northern Star Resources ((NST)) -8.6%, Aristocrat Leisure ((ALL)) – 8.35%, BHP Group ((BHP)) -7.2% and Xero ((XRO)) which lost -6.2%.

For the Mid-Cap50 the highest return was achieved by AMP ((AMP)) with 20.2%, AGL Energy ((AGL)) 12.4%, Mineral Resources ((MIN)) 11.1%, Orora ((ORA)) 10.8%, Ampol ((ALD)) 10.5% and Aurizon Holdings ((AZJ)) which gained 9.2%.

On the flipside, IDP Education ((IEL)) and Lynas Rare Earths ((LYC)) both lost -14.9%, a2 Milk Co ((A2M)) -14.6%, Domino’s Pizza Enterprises ((DMP)) -14.3%, Fisher & Paykel Healthcare ((FPH)) -11.8% and WiseTech Global which lost -11.4%.

The Small Ordinaries Accumulation Index lost -1.5% in April.


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