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Australian Share Market Ends Year With Investors Wiping Out $40 Billion in Value

There was a bloodbath in the Australian stock market as traders swamped the Australian Stock Exchange with sell orders on the final day of the year, wiping $20 billion off the benchmark S&P/ASX 200 Index in the first fifteen minutes of trading.
James Hyerczyk
Australian Stock Market

While Forex traders were cheering the Australian Dollar’s breakout above the psychological 70 cents level on Tuesday, there was a bloodbath in the Australian stock market as traders swamped the Australian Stock Exchange with sell orders on the final day of the year, wiping $20 billion off the benchmark S&P/ASX 200 Index in the first fifteen minutes of trading.

At the end of the session, the S&P/ASX 200 Index was at 6684.10, down 120.80 or -1.78%.

Performance Metrics

The Australian All Ordinaries was down 119.20 points or 1.72% at 6802.40, equating to a net $40 billion loss of capitalization.

Overall, the S&P/ASX 200 surged 1037.7 points in 2019, or up 18.38%. This was its best year since its 30.9% climb in 2009.

For December the ASX200 lost 161.8 points, or 2.36%, in just its third losing month for the year.

It was flat for the quarter, with a 4.2 point loss.

Some investors acknowledged the steep drop in shares, but took it in stride. “Not a very good day, it was just indiscriminate selling, pure profit taking,” Bell Direct market analyst Jessica Amir was quoted as saying by the Sydney Morning Herald.

“But zooming out, it’s still our best annual gain in 10 years,” she added.

Sector Performance

The heavily weighted financial subindex fell 1.34% as shares of Australia’s Big Four banks saw losses. Australia and New Zealand Banking Group shed 0.69%, Commonwealth Bank of Australia fell 1.48%, Westpac slipped 0.7% and National Australia bank declined 1.04%.

Telecom and tech stocks were hit the worst, dropping 3%. The mining sector suffered the least losses, with the sector down 1.1% – buoyed by gold miners, the only group to rise.

For the year, Avita Medical posted the biggest gains, posting a massive 696% rise after its spray-on burn treatment was approved for use in the United States.

Money Laundering Accusations Hit Banking Sector

One of the biggest stories of the year came out of Australia and affected its banking sector.

In November, Australia’s Westpac Banking was accused of 23 million breaches of anti-money laundering rules, with a regulator saying the financial giant enabled payments from “high risk” countries and convicted child sex offenders.

The oversight failure at Australia’s second-largest bank led to “serious and systemic non-compliance” with anti-money laundering laws, financial crime watchdog AUSTRAC said in a court filing.

The regulator is pursuing fines of up to A$21 million ($14 million) for every transaction Westpac failed to monitor adequately or report on time.

Early 2020 Outlook

On Tuesday, IC Markets general manager Nick Twidale said, “… all the fundamentals are locked in for a strong start to the new year.”

Will the euphoria from the announcement of the Phase 1 trade deal continue into 2020? Or will it wear off once the details of the trade deal between the United States and China are revealed? Will China be able to comply with its agreement to buy U.S. agricultural products? Will the reduction of the tariffs move smoothly?

How will the rise in the Australian Dollar to a five-month high affect Australian exports? What if the Reserve Bank of Australia (RBA) postpones near-term rate cuts?

These are some of the important factors to consider when trying to predict the direction and performance of the Australian stock market in 2020.

I think the Aussie Dollars rise, the RBA delay in cutting rates further and some issues with U.S.-China trade relations will keep a lid on stock market performance in 2020.

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