The rise in the Aussie dollar over July weighed on some Australian stocks more than others.
The AUD rose by around 4% in July alone and broke through US80 cents, taking its gains for the calendar year above 10%.
“The stocks most negatively exposed to a sustained trending higher AUD are obviously contained within the global earners index,” Morgan Stanley analysts said in a client note.
The bank’s global earners index monitors Australian stocks that source a large amount of income in overseas markets. The list includes Macquarie Bank, CSL and global insurer QBE.
This chart shows how the global earners index under-performed in July:
Looking at the broader ASX200, Morgan Stanley said that the health care sector fell by 7.5% in July after climbing by more than 20% in the six months to June.
That led the market in the first half of the year, with the second-best performing industrials sector also falling by 3.1% in July.
Those losses were offset by gains in two of the biggest sectors on the index – banks and miners.
According to Morgan Stanley, banks rose by 0.64% across the month while the mining climbed by 0.77% as commodity prices rose in July.
The big banks got a boost after the market assessed the bank regulator APRA’s definition of “unquestionably strong” capital levels wouldn’t mean having to raise more capital externally.
The net effect of those gains against the falls in the global earners index, healthcare and industrial stocks was that the Australian market was little-changed in July.
The ASX200 closed the month at 5,702.80, just down from 5,721 at the end of June.