Aussie equites continue to defy gravity

The Australian equities market continues to defy expectations of a slowdown from last year’s record highs, rising 2.2 per cent in February.

The sector’s performance is due largely to ongoing improvement in commodity prices, according to funds manager Ausbil Dexia.

International equities followed Australian equities as the next best performing sector on the Ausbil Dexia table, while interest sensitive sectors, such as property, delivered lower or negative returns.

Chief Economist John Honan said the outlook for international commodity prices was positive, with a positive flow on impact to selected Australian equities.

“The risk of rising interest rates and a strong currency remains relevant,” he said.

The performance of domestic shares would add around 0.75 per cent to the performance of the average balanced superannuation fund for February, he said. This would take estimated one year returns to around 16 per cent.

Leading the charge for Australian equities last month was the materials sector, with growth of 8.1 per cent, boosted by the performance of BHP Billiton.

The resources sector also made a strong contribution, with the S&P/ASX 100 Resources delivering 10.4 per cent.

Higher short term and long bond yields are having a negative effect on the fixed interest market, Honan said.

In addition, rising interest rates are having a moderating impact on asset valuations in the listed property sector and financial stocks generally.