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James Hyerczyk
China and Australian Shares

China shares outperformed stocks in Australia in 2020 by a long-shot, which comes as surprise due to the attention the Australian Dollar has been receiving after hitting multi-year highs throughout the year. However, at second glance, it’s really not a major revelation since the Aussie gains were largely attributed to a weaker U.S. Dollar and not an outstanding performance in the Australian economy.

China’s stock market likely outperformed the Australian stock market because of the strength of its recovery from the pandemic and policy support with forecasts calling for 2% growth in 2021. Meanwhile, the Australian economic recovery is forecast to be rocky in 2021.

The technology sector in both countries performed remarkably well, but the energy sector was a major drag on the Australian benchmark’s performance.

China Stocks Hit Multi-Year Highs to Close Out 2020

China stocks rose to multi-year highs on the last trading day of 2020, as investors cheered a Sino-Europe investment deal and Beijing’s policy support for its capital markets.

The blue-chip CSI 300 index closed up 1.9%, at 5,211.29, the highest level since June 15, 2015 while the Shanghai Composite Index gained 1.7% to 3,473.07, its highest since February 5, 2018.

Major indexes posted robust yearly gains, with Shenzhen’s start-up board seeing its strongest year since 2015, thanks to the economy’s recovery from the coronavirus pandemic and policy support.

The European Union and China agreed on Wednesday to an investment deal that will give European companies greater access to Chinese markets and help redress what Europe sees as unbalanced economic ties.

Also boosting sentiment, China said on Wednesday it planned to increase the proportion of the country’s annuity funds that can be used to invest in equities, which could inject 300 billion yuan ($45.95 billion) into markets.

For the month, the CSI300 rose 5.1%, while the Shanghai Index firmed 2.4%.

For the year, the CSI 300 gained 27% and the Shanghai Index 14%.

The tech-heavy start-up board ChiNext rose 63% in 2020, posting its biggest yearly gain since 2015, versus a 43% gain for the U.S. NASDAQ Composite.

Analysts and traders said the solid gains in the market were also supported by the recovery in China’s economy from the pandemic lows.

The country’s economy is expected to expand around 2% in 2020, the weakest pace in over three decades but stronger than other major economies struggling to contain infections.


Australia Shares Close Year of Historic Highs and Lows Little Changed

Australian shares wrapped up 2020 little changed from where they had begun, with tech stocks emerging as winners due to meteoric growth in buy-now-pay-later firms, while energy stocks saw their worst year since 2015.

Last Thursday, the S&P/ASX 200 Index ended 1.4% lower at 6.587.10, capping off a year of record highs and historic lows just 1.5% below where it had closed in the first session of 2020.

Tech stocks closed 2020 at their best year on record with a gain of nearly 57%, mostly powered by exponential growth in buy-now-pay-later firms as stuck-at-home Australians turned to alternative credit for online shopping.

Afterpay quadrupled its market value, while smaller peers Sezzle and Zip rose more than 200% and 50%, respectively.

Miners gained 18%, with their bull run projected to continue into 2021 backed by rising iron ore prices.

BHP Group and Rio Tinto added more than 11% and 15%, respectively.

Energy stocks closed nearly 30% lower as pandemic-induced lockdowns battered fuel demand, but a turnaround is expected in 2021 as oil prices stabilize.

For a look at all of today’s economic events, check out our economic calendar.
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