June In Review: FY24 Another Double Digit Return

Australia | Jul 03 2024

This story features COMMONWEALTH BANK OF AUSTRALIA, and other companies. For more info SHARE ANALYSIS: CBA

FY24 offered Ai and share market polarisation, but also a double digit return at the index level for the second year in a row.

-June capped off another double digit FY24 performance
-Sectors: the movers and not so shakers over the last 12-months
-FY24 was a year of polarised performances
-FY25 might well include one more RBA rate hike

By Danielle Ecuyer

The ASX200 squeaked out a 1.01% gain (total return, incl dividends) in June, delivering what can only be described as a much better-than-expected FY24 total return of 12.1%, or a 7.8% price appreciation ex-dividends.

Following on from 9.7% price appreciation and 14.8% total return in FY23, investors might be somewhat surprised such high Australian share market returns have been achieved in an interest rate hiking cycle.

Putting the last two financial years in context: the local index’s total return has averaged 6.37% over the past three years, 7.26% over the past five, and 8.06% over the past decade.

Macquarie makes an interesting observation around the FY24 price gains. The broker emphasises most of the price returns were achieved via an expansion in the price-to-earnings valuation. Earnings growth, or the lack thereof was noted as a -3 percentage points drag on stocks with resources down the most at -10% points, and utilities up a robust 21% points.

Macquarie also points to the banks regaining the top spot as dividend payers with total dividends contributing 4.3% points to the total FY24 return.

Financials (including insurance, banks, and services) took the top sector gong in June, rising over 5% to be up 29% in FY24. Banks were the heavy lifters rising 34.9% over the financial year, which Macquarie observes was due to price-to-earnings multiple expansion, up 30% points, compared to forward earnings expectations declining -2.2% points over the last 12-months.

Commonwealth Bank ((CBA)) shares recently hit an all-time high of over $128 which equates to around a 30% price return in FY24.

JP Morgan by comparison is also trading a 52-week high following a 40%-plus price return in the last year. UBS shares are near a 52-week high, having risen over 60% in FY24.

Macquarie attributes much of the Australian gains as indicative of investors becoming more positive about rate cuts and growth.

In June, the Australian 10-year government bond fell -10bps to 4.31% and the US 10-year Treasury yield declined -12bps to 4.37%.

Morgan Stanley stresses the June ASX performance was underpinned by “Blue Chips” including Commonwealth Bank and National Australia Bank ((NAB)), alongside CSL ((CSL)) and Macquarie Group ((MQG)) doing the heavy lifting, adding 57bps, 31bps, 32bps and 21bps in performance, respectively.

Woolworths Group ((WOW)) added 12bps while BHP Group ((BHP)), Fortescue ((FMG)) and Rio Tinto ((RIO)) were the main losers in the closing month at -40bps, -25bos and -16bps, respectively.

It was indeed a year that preferenced large caps over small caps. At the financial year’s finish, June offered more of the same, with analysts at JP Morgan highlighting the Small Ordinaries Accumulation index was down -1.7% in June, underperforming the S&P/ASX100 by -2.7%. Small Industrials were up +1.1%, but that still underperformed the S&P/ASX100 Industrials by -2.2%. Small Resources were down -8.1%, underperforming the S&P/ASX100 Resources by -2.1%.

Those same analysts also report the Small Ordinaries index is currently trading on a one-year forward P/E of 18.1x, in-line with the five-year average. The Small Industrials Index is trading on a one-year forward P/E of 20.3x, a -2% discount to its five-year average, and the Small Resources index, which has a one-year forward P/E of 13.8x, is at an 8% premium to its five-year average.

Looking back on FY24

Metals and mining picked up the worst performing sector gong in June, down -7.2% as concerns around the growth outlook for China rose.

Traditional defensive sectors, notably telecom and consumer staples, were dragged lower by -10.4% and -9.3% to be the worst performing sectors in FY24.

Macquarie cites earnings downgrades and price-to-earnings multiple declines, which were no doubt supported by media and political attention on margins for the likes of Woolworths Group, Coles Group ((COL)), and Metcash ((MTS)), as well as a disappointing market update from Telstra Group ((TLS)).

Interestingly, discretionary retail clocked up a 34.5% annual price return, auto and parts up 29.8%, followed by software and services up 29%.

The Goodman effect

At face value, A-REITs had a cracking year with the local sector index outperforming the broader market by no less than 12.5% on a rolling 12 months measurment, but as pointed out by JP Morgan, this was almost entirely driven by sector heavyweight Goodman Group ((GMG)) whose shares caught the Ai-data centres fever throughout the year.

In June, the sector performance remained flat and only four of the 21 constituents did not slumber backwards throughout the month. JP Morgan does also highlight June saw the second sequential month of improving property transaction volumes.

Irrespective of the cloudy RBA outlook short term, the sector locally is again showing signs of increasing activity with JP Morgan reporting year to date transactions are now annualising at $18.8bn, still well below through-the-cycle levels, but also a 21% improvement on the weak 2023 baseline ($15.6bn).

Polarised performances 

MSCI Australian Growth returned 15.7% in FY24, against the US comparison at 34.1%. 

Australian large caps rose 13.2% against the Mid Cap 50 at 6.5% and the Small Ordinaries at 9.3%.

US large caps lifted 26.5%, against mid-caps at 12.5% and small caps at 11.6%.

US cyclicals outperformed defensives.

Highest and Lowest Annual FY24 returns

Taking a quick snapshot of the best ASX50 shares in FY24, Goodman Group ((GMG)) rose 74.4%, Cochlear ((COH)) 46.9% and National Australia Bank at 44.4%, with Wisetech Global ((WTC)) up 29.4% and Aristocrat Leisure ((ALL)) at 31.6%.

Looking at the lowest 12-month returns for the ASX50, Pilbara Minerals ((PLS)) fell -33.5%, Sonic Healthcare ((SHL)) -24.2% and Mineral Resources ((MIN)) -22.6%, with Telstra Group down -12.6% and Woodside Energy ((WDS)) falling -11.5%. Dexus ((DXS)) was the best of the lowest performers down -9.5%.

Dipping into the MidCap50 and Pro Medicus ((PME)) rose 118.4%, Paladin Energy ((PDN)) 78.3%, CAR Group ((CAR)) up 54.4%, JB Hi-Fi ((JBH)) up 48% and REA Group ((REA)) up 44.2%.

IGO Ltd ((IGO)) was the worst 12-month performer in the MidCap50, with the shares down -57.9%.

Life 360 ((360)) won the gold star in the Small Ords, rising 122.7% for FY24. Lithium developer Liontown Resources ((LTR)) sat in the naughty corner as the worst performing small cap, down -68.4%.

Will July bring home the seasonal ASX bulls?

The start of FY25 might not be offering Australian investors such a smooth ride, with the market coming to grips with the very real possibility of another 25-basis point rate hike at the RBA meeting in August.

Morgan Stanley and UBS have both penciled in an August 25bps rate hike to 4.6%, and the ASX cash futures are currently pricing in a 45% chance of a 25bps cash rate rise.

Barrenjoey sees a 40% chance the RBA might hike one more time, but adds: “The accumulation of data between now and the RBA’s meeting will be important for the final decision”.

As Macquarie highlights, in May the futures were only pricing in a 5% chance of another hike.

The May inflation print up 4%, has for now, poured more than a glass of cold water on the RBA rate cutting narrative and the prospect for higher rates, for longer, seems more real.

The big question for bank shareholders will be: can the big four keep on keeping on with the shifting sands on interest rate expectations?

Macquarie is quick to focus on the seasonality outlook for shares in July, which has been the top month for performance and ASX equity returns and the number two month for US equities.

Traditionally, the broker singles out shares with weak momentum and high volatility, which were impacted the most by June tax loss selling as the better performers. 

By comparison, low-risk momentum shares such as the banks typically underperform in July. 

ASX100 Best and Worst Performers of the month (in %)

Company Change Company Change
PME – PRO MEDICUS LIMITED 19.26 LTM – ARCADIUM LITHIUM PLC -25.86
IAG – INSURANCE AUSTRALIA GROUP LIMITED 15.16 MIN – MINERAL RESOURCES LIMITED -24.76
SDF – STEADFAST GROUP LIMITED 11.96 PDN – PALADIN ENERGY LIMITED -21.66
ALL – ARISTOCRAT LEISURE LIMITED 10.75 IGO – IGO LIMITED -19.31
TWE – TREASURY WINE ESTATES LIMITED 9.80 PLS – PILBARA MINERALS LIMITED -19.00

ASX200 Best and Worst Performers of the month (in %)

Company Change Company Change
STX – STRIKE ENERGY LIMITED 40.00 LTR – LIONTOWN RESOURCES LIMITED -30.38
BAP – BAPCOR LIMITED 20.94 LTM – ARCADIUM LITHIUM PLC -25.86
PME – PRO MEDICUS LIMITED 19.26 MIN – MINERAL RESOURCES LIMITED -24.76
HLS – HEALIUS LIMITED 18.11 PDN – PALADIN ENERGY LIMITED -21.66
IAG – INSURANCE AUSTRALIA GROUP LIMITED 15.16 RED – RED 5 LIMITED -20.00

ASX300 Best and Worst Performers of the month (in %)

Company Change Company Change
STX – STRIKE ENERGY LIMITED 40.00 CTT – CETTIRE LIMITED -49.79
OBL – OMNI BRIDGEWAY LIMITED 32.14 PMT – PATRIOT BATTERY METALS INC -35.63
ZIP – ZIP CO LIMITED 28.07 LRS – LATIN RESOURCES LIMITED -34.62
TYR – TYRO PAYMENTS LIMITED 23.60 LTR – LIONTOWN RESOURCES LIMITED -30.38
BAP – BAPCOR LIMITED 20.94 INR – IONEER LIMITED -30.23

ALL-TECH Best and Worst Performers of the month (in %)

Company Change Company Change
TYR – TYRO PAYMENTS LIMITED 23.60 MP1 – MEGAPORT LIMITED -17.26
PME – PRO MEDICUS LIMITED 19.26 APX – APPEN LIMITED -16.07
PPS – PRAEMIUM LIMITED 13.48 4DX – 4DMEDICAL LIMITED -11.86
MAQ – MACQUARIE TECHNOLOGY GROUP LIMITED 12.91 BRN – BRAINCHIP HOLDINGS LIMITED -10.20
WBT – WEEBIT NANO LIMITED 11.84 4DS – 4DS MEMORY LIMITED -5.95

All index data are ex dividends. Commodities are in USD.

Australia & NZ

Index 30 Jun 2024 Month Of Jun Quarter To Date (Apr-Jun) Year To Date (2024)
NZ50 11717.430 -1.26% -3.20% -0.45%
All Ordinaries 8013.80 0.54% -1.72% 2.35%
S&P ASX 200 7767.50 0.85% -1.64% 2.33%
S&P ASX 300 7708.20 0.75% -1.78% 2.29%
Communication Services 1501.20 2.61% -4.93% -5.48%
Consumer Discretionary 3511.50 3.07% -2.91% 8.37%
Consumer Staples 12378.00 4.60% 0.16% 0.55%
Energy 10031.50 -1.59% -6.89% -5.57%
Financials 7657.10 5.06% 2.66% 13.97%
Health Care 44256.10 4.34% 1.88% 4.52%
Industrials 6811.50 -0.89% -5.15% -0.79%
Info Technology 2341.50 1.46% 2.83% 27.75%
Materials 16878.20 -6.53% -5.93% -13.40%
Real Estate 3563.20 -1.17% -7.14% 6.44%
Utilities 9285.00 3.49% 12.08% 13.51%
A-REITs 1624.30 -0.90% -6.84% 8.11%
All Technology Index 3137.90 2.05% 1.36% 16.48%
Banks 3195.20 5.03% 3.57% 14.96%
Gold Index 7357.30 -4.75% 1.59% -0.14%
Metals & Mining 5550.50 -7.24% -4.98% -14.17%

The World

Index 30 Jun 2024 Month Of Jun Quarter To Date (Apr-Jun) Year To Date (2024)
FTSE100 8164.12 -1.34% 2.66% 5.57%
DAX30 18235.45 -1.42% -1.39% 8.86%
Hang Seng 17718.61 -2.00% 7.12% 3.94%
Nikkei 225 39583.08 2.85% -1.95% 18.28%
DJIA 39118.86 1.12% -1.73% 3.79%
S&P500 5460.48 3.47% 3.92% 14.48%
Nasdaq Comp 17732.60 5.96% 8.26% 18.13%

Metals & Minerals

Index 30 Jun 2024 Month Of Jun Quarter To Date (Apr-Jun) Year To Date (2024)
Gold (oz) 2337.95 -0.20% 6.56% 14.35%
Silver (oz) 29.25 -5.98% 19.00% 19.98%
Copper (lb) 4.3335 -5.04% 8.54% 13.80%
Aluminium (lb) 1.1245 -7.79% 8.27% 15.65%
Nickel (lb) 7.7782 -14.07% 3.86% 4.59%
Zinc (lb) 1.3261 -3.88% 20.38% 17.92%
Uranium (lb) weekly 83.25 -8.77% -5.40% -3.20%
Iron Ore (t) 106.51 -9.45% 4.82% -22.95%

Energy

Index 30 Jun 2024 Month Of Jun Quarter To Date (Apr-Jun) Year To Date (2024)
West Texas Crude 81.86 5.12% 0.17% 10.91%
Brent Crude 85.44 4.27% -1.05% 7.80%

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CHARTS

360 ALL BHP CAR CBA COH COL CSL DXS FMG GMG IGO JBH LTR MIN MQG MTS NAB PDN PLS PME REA RIO SHL TLS WDS WOW WTC

For more info SHARE ANALYSIS: 360 - LIFE360 INC

For more info SHARE ANALYSIS: ALL - ARISTOCRAT LEISURE LIMITED

For more info SHARE ANALYSIS: BHP - BHP GROUP LIMITED

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For more info SHARE ANALYSIS: CBA - COMMONWEALTH BANK OF AUSTRALIA

For more info SHARE ANALYSIS: COH - COCHLEAR LIMITED

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For more info SHARE ANALYSIS: FMG - FORTESCUE LIMITED

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For more info SHARE ANALYSIS: IGO - IGO LIMITED

For more info SHARE ANALYSIS: JBH - JB HI-FI LIMITED

For more info SHARE ANALYSIS: LTR - LIONTOWN RESOURCES LIMITED

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For more info SHARE ANALYSIS: PME - PRO MEDICUS LIMITED

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For more info SHARE ANALYSIS: WTC - WISETECH GLOBAL LIMITED