Australia’s Stock Benchmark Surges to a Record High

(Bloomberg) -- Australia’s stock market is on a tear, with surging commodity prices and a v-shaped economic rebound from the pandemic pushing the nation’s benchmark index to a record high.

Mining giants BHP Group and Rio Tinto Ltd. traded at all-time highs on Monday as global demand fuels surging metals prices while the country’s biggest banks advanced amid rising earnings. With Australia largely containing the coronavirus and policy makers vowing to maintain monetary and fiscal stimulus, sentiment is buoyant among business and investors.

“We are now seeing a value-led rally ripping through the Australian share market,” said Russel Chesler, head of investments and capital markets at Van Eck Australia. “We could see an outperformance of the U.S. share market over the remainder of the year due to the greater representation of value share in Australia.”

The S&P/ASX 200 Index closed up 1.3% at 7,172.80 beating its previous peak set in February last year erasing the losses caused by the coronavirus. After lagging behind regional peers in 2020, the Australian shares have climbed almost 9% this year, double the gain seen in the MSCI AC Asia Pacific Index.

“The story really changed at the back end of 2020 when the big growth to value rotation began,” said Kyle Rodda, an analyst at IG Markets Ltd. “All of the sudden the economic cycle was lifting off,” boosting banking and mining shares, which make up over half of the nation’s stock gauge.

The optimism is also reflected in everything from higher house prices and a rising currency to a falling unemployment rate. The Australian dollar rose 0.2% to 78.57 U.S. cents on Monday and is trading near the highest level since February. Australian bonds fell, with yields on 10-year notes declining three basis points to 1.71%.

Australian stocks have taken longer than other developed markets in reclaiming their record highs, held back by a stronger Australian dollar and a lack of growth shares, Rodda said. Surging commodities prices helped the ASX 200 outperform other developed Asian markets in April, he added.

Australian business confidence and business conditions each hit new highs. The nation’s largest banks capped a strong half-year reporting season last week, with National Australia Bank Ltd., Australia & New Zealand Banking Group Ltd. and Westpac Banking Corp. posting big earnings gains.

The gauge has soared more than 50% since a low in March of last year in a rally underpinned by technology, consumer discretionary and mining stocks.

©2021 Bloomberg L.P.