As the market closes in on the end of Q1, it is the Australian-related equities that have so far suffered the most this year, according to data.
According to FE Analytics, within the Australian Core Strategies universe, four out of the five worst-performing equity sectors were Australian related – Australian equity income, Australian equities, Australian small/mid cap equities, and Australian geared equities.
Australian geared equities lost the most since 1 January, 2020 at 43.69%, followed by Australian small/mid cap equities at a loss of 34.94%, global hedged equities at a loss of 31.04%, Australian equities at a loss of 29.69%, and Australian equity income at a loss of 29.27%.
Worst-performing equity sectors since the start of 2020
Source: FE Analytics
The worst-performing fund within the Australian gear equity sector was Maple-Brown Abbott Australian Geared Equity Ordinary fund at a loss of 62.04%.
This was followed by Perpetual Wholesale Geared Australian Share Fund at a loss of 66.51%, Ausbil Australian Geared Equity at a loss of 61.34%, BetaShares Geared Australian Equity Hedge at a loss of 59.29%, and AMP Capital Specialist Geared Australian Share A at a loss of 57.98%.
Maple-Brown Abbott’s latest factsheet noted the heavy sell-off in global equities stemming from COVID-19 and that Australia was an underperformer on a currency adjusted basis.
“Local economic data was mixed, but similarly not a key driver of markets. Looking at performance by sector, defensives generally outperformed. Utilities (-4%) was the strongest, followed by health care (-4%), Australian real estate investment trusts (-5%) and financials (-5%). Information technology (-17%) was the worst performer, followed by energy (-17%) and materials (-12%),” it said.
The fund noted its decision not to hold biotechnology firm, CSL, was the main negative contributor to its performance.
“The company delivered a solid half-year result, driven by strong performance from the core plasma business, albeit only in line with market expectations. Our resources holdings also detracted materially. Energy names were the worst hit, including Woodside Petroleum (-17%) and Origin Energy (-15%), which suffered a lower oil price on coronavirus-related global growth fears.
“Our overweight holding in BHP Billiton (-15%) also underperformed. Whilst BHP’s iron ore business continues to perform well and spot prices held up over the month, the market has taken a cautious view regarding emerging risks to Chinese and global growth. BHP’s oil exposure further weighed on the share price.”
Over the three years to 29 February, 2020, the fund returned 5.78%. This was lower than both its sector and S&P ASX 200 benchmark at 29.26% and 28.05% respectively. The fund has not beat either since March 2017.
Maple-Brown Abbott Australian Geared Equity Ordinary performance v benchmark and sector over the three years to 29 February 2020
Source: FE Analytics
Perpetual’s largest stock holding, according to its February 2020 factsheet, was Commonwealth Bank of Australia at 6%, followed by Crown Resorts at 5.7%. Perpetual noted that Crown Resorts was its largest overweight in the portfolio.
As of midnight today, all casinos, gaming and gaming venues were closed under the government’s latest round of social restrictions stemmed from the COVID-19 pandemic.
Crown Resorts has ceased all its gaming activities and food and beverage (except for takeaway and meal delivery) businesses.
Data from the Australian Securities Exchange (ASX) showed the Crown Resorts share price has almost halved since the start of the year to $6.60 per share at the time of writing.
However, over the three years to 29 February, 2020, the fund has returned 16.57%. Prior to the COVID-19 pandemic triggering a global selloff in February, the fund had returned 52.4% on 20 February, but had now lost 23.52% since then.
Perpetual Wholesafe Geared Australian Share Fund performance v benchmark and sector over the three years to 28 February 2020
Source: FE Analytics
The February factsheet noted that the global economic impact COVID-19 would have had not been realised yet but it would likely be significant.
“The flow-on effect for corporations may lead to further earning-downgrades which will present additional challenges for the market over the remainder of the fiscal year,” it said.
“Despite the Australian market retreating from its recent record high, stock valuations remain stretched, particularly in the industrial ex financials sector where valuations now exceed dot com levels. While the domestic economy continues to remain weak from the recent bushfires, drought, and higher costs weighing on growth, house prices have started to recover from their recent declines. This, however, is yet to be reflected in robust consumer confidence.
In light of the challenging environment, we continue to find opportunities in quality companies with robust balance sheets, strong management, and industry positions that trade at reasonable market multiples.”
