The ASX is now behind for 2017

Stephen Morton/Getty Images

The ASX200 fell below 5700 points today and kept going, pushing the index below where it started at the beginning of the calendar year.

At one point during the session was down more than 1% to 5,650.70. At the start of the year the index was at 5,733.18.


Looked at another way, the ASX200 is about where it was in 2014.

Currency differentials are also a factor. The Australian dollar, in which ASX assets are priced, is up around 10%, so if you’re looking at the ASX from a global investor’s perspective, then the returns have been strong (if you’re unhedged).

The local market fell today on negative sentiment after North Korea launched a missile over Japan.

The major banks, which have been hit by a series of scandals this year and are facing regulatory and political uncertainty, led the falls today with Westpac shedding 1.8% to $30.96 and the Commonwealth down 1.5% to $75.51.

The general subdued outlook of the market hasn’t been helped by the corporate earnings season, now winding down, which has been mixed. About 90% of companies have produced a profit, above the 87% long-term average but down from 94% in the February 2017 reporting season. Overall, 91% of full-year reporting companies have elected to pay a dividend.

The strongest sector is resources, where mining and energy companies have benefited from cost-cutting and improving commodity prices.

But as Shane Oliver, chief economist at AMP Capital, noted in a recent note to clients, if you “dig beneath the surface and it’s not quite so good”.

“First, the huge upswing in earnings owes to the rebound in the fortunes of the big resources stocks with resource sector profits up around 130% and there is no doubt that the turnaround here is impressive and reflecting this they have increased their dividends substantially,” Oliver said. “However, profit growth in the rest of the market is more modest at around 5-6%.”

By contrast, global markets have been performing strongly. The S&P500 in the US is up around 10% for the year.

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