Investors are increasingly shunning the Australian sharemarket amid fears that big miners and banks have dominated and overvalued the local bourse, despite its long underperformance against tech-heavy global indices.
The S&P/ASX 200 Index is up just 0.5 per cent year-to-date and has fallen 1.3 per cent over the past 12 months, making it an ugly outlier while Wall Street has jumped 16.3 per cent, and the UK’s FTSE 100 is up almost 15 per cent.
Other tech-heavy Asian markets have performed even better; Korea’s Kospi index has doubled, and Japan’s Nikkei 225 is up more than 40 per cent.
But it’s not just the lagging performance that has investors looking abroad – the local market is also considered to be expensive.
Almost one-third of ASX’s profits come from the financials sector, which is expected to come under considerable pressure amid a housing downturn and the potential for two more rate rises from the Reserve Bank of Australia this year after the central bank lifted the cash rate three times to 4.35 per cent.
On the other hand, less than 1 per cent of the ASX profits come from tech.
“Australia has given investors the worst of both worlds,” said Antipodes Partners global small and mid-cap fund portfolio manager James Rodda, who is underweight the ASX.
“It’s quite hard to square the fact that Australian shares have lagged the rest of the world, while large-cap valuations remain high versus their own history.”
Source: https://www.afr.com/markets/equity-markets/investors-worry-that-the-asx-is-both-expensive-and-underperforming-20260914-p60x18