A late slide saw the Australian share market end the year in a manner that has become all too common in the last three months.
Early strength replaced by second thoughts, volatility flares, investors lose heart, buyers turn tail as selling overwhelms – it was a story first seen at the start of 2018 before a turnaround in sentiment, only to resurface in the final quarter of the year.
The ASX lost 9% since September – the worst quarter since September 2011. For the year the ASX 200 dropped 6.9%, and more than 8.2% in the final quarter of the year.
As a result, the ASX 200 ended lower on the last day of the year, confirming 2018 as the worst 12 months for the bourse since 2011.
The ASX 200 index ended 2018 down 7.9 points, or 0.14%, at 5,645.0 on New Year’s Eve.
The market had been ahead as 33.6 points, at 5,693.6, an hour before the early close at 14.10pm but slumped as sellers drove the index lower to end the year in the red.
The wider All Ordinaries had a similar experience – ending down 6.6 points, or 0.12%, at 5,715.0 on New Year’s Eve, having also been higher throughout the day.
It lost 7.42% in 2018.
The big four banks and AMP dominated the market, as usual, thanks to the Hayne Royal Commission.
While the shares of these financial giants took a whack from the disclosures at the commission, small listed insurer, Freedom Insurance Group was the biggest casualty with its share price collapsing 95.6% over 2018 as it ended the year with its financial strength in doubt and on the edge of collapse.
AMP shares slumped nearly 53% as its the credibility of its board, management, and business model were destroyed by the disclosures at the commission. It has a new CEO, newish chair and faces pressures over the sale of part of its insurance business. 2019 should see big losses and a contentious annual meeting in May.
Among the bank, Westpac was the biggest victim – its shares losing 20%, while NAB shares fell 18% and ANZ shares lost 14.9% in value. Westpac, ANZ and NAB shareholders all delivered first strikes against their bank’s remuneration reports at their annual reports in December.
But the big surprise was the performance of Commonwealth Bank shares which lost just 9.9% over 2018, despite it being by far the most egregious performer of the big four with the Austrac money laundering story, the disclosures at the royal commission and a reshaping of senior management – the CBA escaped censure from shareholders at its AGM in November.
Aftertouch Pay, the buy now, pay later company was a standout performer – the shares jumped 107% over 2018, despite a 28% slump in the final quarter of the year.
BHP though had a stand out year – while the ASX 200 lost nearly 7%, the world’s biggest miner saw a 15% gain for its shares – despite the sharp fall in oil prices in the final quarter.
Helping BHP was quitting its problematic US onshore oil and gas assets, a big share buyback and special dividend helped, as did a stronger than forecast performance by iron ore, the company’s key commodity.
Iron ore prices ended 2018 all but steady on the end of 2017. The price of copper, BHP’s other major metal saw a 13% slide in 2018. BHP shares fell 1.1% in the final quarter.
Coking coal prices held up and ended the year at or just over $US200 a tonne, despite being widely forecast to fall to $US150 a tonne or less in the year. That helped offset the slide in oil of 20% for US crude and 14% for Brent (and 39% for US crude in the final quarter and 36% for Brent).
By contrast, shares in Rio Tinto could only manage a rise of 3.5% for the year as a whole. Rio shares were down 0.2% for the year.
Fortescue Metals shares lost more than 14% over 2018, but staged a surprise 7% rise in the final quarter as Chinese steel mills boosted purchases of lower quality iron ore ( the sort Fortescue produces).
Shares in gold and copper miner, OZ Minerals ended the year down 3.9% as gold prices rose strongly in the final quarter. Gold rose 7% in the final three months (down 4% for the year, though), copper fell more than 6% in the three months to December.
Shares in the country’s biggest gold miner, Newcrest (which has significant copper operations) jumped 12% in the final quarter which left it adrift for 2018 by 4.4%.
Perth-based lithium and would be iron ore group, Mineral Resources saw its shares slide by more than a quarter over 2018 – the 26% slide came despite the deal to sell a 50% stake in its big Pilbara lithium mining operation to US giant, Albermarle for $US1.15 billion.
Among retailers, Woolworths stood out with its shares up 7.7% for the year. But Myer shares shed 37%, The Reject Shop’s shares lost 51.1%, but shares in Noni B, the revitalised Sydney-based fashionwear group ended 2018 with a 43% gain – but a 21% slide in the final three months of the year.
Shares in Coles spun off from Wesfarmers in November, lost 10% in the final five weeks of the year closing at $11.74 against the issue price of $13.05.
In the media groups, shares in Nine ended the year down 10% and more than 39% in the final quarter as the company absorbed Fairfax Media in the final weeks of 2018. Shares in real estate listing website group, Domain shed 35% of their value over 2018 (more than 36% in the final quarter).
Kerry Stokes’ Seven West Media saw its shares lose 10.5% over the year, but 44.7% in the final quarter while the Murdoch family’s News Corp saw its US listed shares slump 31% over the year as investors worried about its Foxtel takeover.
Shares in its 61% real estate listings website group, REA Group only fell 3.5% over 2018 (but down 13% in the final quarter).
The slide in the price of Coles shares late in 2018 was symptomatic of the way investors treated some big dollar floats.
For example oil importer, refiner and retailer, Viva Energy raised $2.65 billion at $2.50 a share in July. It was the biggest raising of the year.
The shares hit a low of $1.80 in November after Viva announced that it would not meet its prospectus profit forecasts (but would still return a solid profit). The shares ended 2018 down 21%.
But it wasn’t just Viva that felt the impact of the slide in oil prices, especially in the final quarter. Caltex, the country’s major importer and retailer saw its shares fall more than 25% (13.7% in the final quarter) as its profit margins contracted (as has Viva’s).
The L1 Long Short Fund was the second largest raising of the year with $1.35 billion at $2 a share. It hit a low of $1.285 in December and ended December on $1.35 to be down 32.5%. Did anyone at the fund think to short its shares? it would have been a killer of a strategy for the fund.
US-sponsored, Coronado Coal saw its shares fall by well over 10% at its debut from its $4 offer price. It hit a low of $2.85 in December and ended 2018 at $3.06, down 23.5% for the year.
PEXA, the electronic property conveyancing group was slated to list on the ASX with a value of $2.2 billion, but that was aborted and the company sold to Link and other shareholders for $1.6 billion – a loss than was nicely avoided by prospective investors, but not by the promoters.
The ASX said shares worth more than $45.8 billion listed on the ASX in 2018 which was on the face of it, a big year. But that was boosted by the Coles spin-off and the structured takeover of Westfield by European investor, Unibail.
These two deals contributed $26.8 billion to the value of new listings, meaning a much more sedate $19 billion of new listings occurred.
