The Evolution Of Australia’s Equity Market Over The Past Century

Time is dynamic. Business is dynamic. Change might be the only constant factor but surprisingly for the Aussie share market, some events and statuses have remained intact over the past century. A 100 years is a really long period, and to have similarities and consistency in this elongated time frame is a noteworthy discussion.

Australia- The Land Down Under:

The country, referred as mentioned above, is due to its positioning in the southern hemisphere of the Earth. Australia is the world’s sixth largest country by area and the largest country in Oceania, is a well-developed nation. It is said to be the world’s 14th largest economy. The high-income economy of the Aussie land makes it the world’s 10th highest per capita income economy. Last year, Australia surpassed Switzerland to become the country with the highest average wealth.

Map of Australia (Source: Australian Government Website)

Even though it is the driest inhabited continent, the booming economy of the Australia is blessed by the expanse of metals and minerals that is embedded within the country, making some of the market experts referring to it as “The Lucky Country”. There have been technological advancements and global trade expansion in the Aussie business over the years.

A notable event in the Australian economy’s discussion, often and rightly emphasised on is the fact the country was the only advanced economy that ceased to get adversely impacted by the Global Financial Downturn in 2008-2009 period.

The Australian Share Market:

Australia’s main securities exchange is the Australian Securities Exchange (ASX), which is owned by the Australian Securities Exchange Limited. The ASX is a payment system facilitator, market operator and clearing house and is counted amongst the world’s top 16 listed exchange groups. The Australian equity market is deemed to be the 8^th largest across the globe, based on the free-float market capitalisation.

The regulation and governance of the ASX is taken care of by the Australian Securities and Investments Commission (ASIC), who handles ASX compliances and operating rules. The clearing and settlement affairs related to the financial system stability is taken care of by the Reserve Bank of Australia (RBA).

On the ASX, there are numerous shares, warrants, exchange traded options, exchange traded funds, futures and likewise products that can be traded. Banking and financial space comprise of the biggest stocks that trade on the exchange, when considered through their market capitalisation. Also, the most prominent and renowned market index is the S&P/ASX 200, containing the topmost two hundred stocks listed on the ASX.

The History of the Australian Share Market:

The trading on the Australian Exchanges was initially led by a call system for the bid to take place. The 1960s saw the transit to a post system, wherein bids and offers were written on blackboards to record transactions. The 80’s welcomed the introduction of the electronic system and by 90’s, trades took place via computers. The Aussie share market has history that dates back to these time frames, over the past 150 years.

As per the statistics from 30 November 2018, the Australian stock market was the 16th largest equity platform across the globe with a domestic equity market amounting to almost A$1.9 trillion. On this note, let us have a look at the significant events for the same:

The Australian Equity Market performance over time:

Over the past 100 years, the Australian equity market has increased in size relative to the economy, while its composition by industry has also undergone a substantial change. Being an important source of funding for the Australian companies, and a retirement saving warehouse, the Aussie share market is a significant and high profile financial markets. At the end of 2018, the total capitalisation of listed companies in Australia was almost $2 trillion, with $5 billion in shares being traded on a regular basis. The most notable listings include major banks and resources firms, which are prime contributors towards Australian output and employment.

The Australian Financial Market (Source: RBA)

The main motive for investing for most investors is to gain good shareholders returns on their investments. The Aussie share prices have risen by an average of approximately 6 per cent each year, in the last 100 years. It is a strange yet notable finding that in this time frame, the different industrial sectors have generally performed quite similarly. The dividends on the stocks of Australia are comparatively more than other economies, because of tax treatment in Australian region.

The total nominal return on shares has been around 10 per cent per year over the century. Another strange yet notable finding in this time frame is that in the last 100 years, there have not been material differences in returns across sectors.

Dividend Yields (Source: RBA)

Adding on to the strange yet notable findings, the present day listed companies on the ASX, or the composition of the stock market is very similar to its composition that existed 100 years ago. The ASX has some of the oldest companies of the world on its listing. Finance and resource corporations have accounted for the majority of the listing volumes, followed by the mining companies. Precisely, it can be concluded that the Australian equity market has exhibited growth during the last 100 years to be a vital part of the country’s financial arrangement.

Market capitalisation by sector (Source: RBA)

Recent Evolution of the Australian Equity Market:

Concentrating on the current business environment, the globe is being taken by the storm with various occurrences on the global level. The world has come a long way and we are at present time, talking in terms of the technological advancements, trade wars, 5G boom, artificial intelligence, virtual reality, electric vehicles, cultured meat revolution and legalisation of cannabis. The rich Australian equity market is no-where behind in these discussions and is thriving hard to pace up with the global drifts in the business world.

Before this, it is important to note that presently, the Australian economy is at a unique point. After posting a historic 30-year long period of consecutive growth, the economy is showing signs of eventually slowing down. The main triggers, out of the many, are believed to be the interest cuts and impact of trade war amid China and US. However, being the powerhouse that it is, the top 100 companies of the Aussie equity market have been up by almost 9 per cent in the past year.

Getting back to the evolution, Dual listing has made a mark on the ASX. By 2000, the entire Aussie firms figure, who had dually listed their respective stock on the NZX as well stood around one hundred and twenty. To reap benefits of exposure, more investing opportunities and savour increased liquidity, companies have chosen to indulge in dual listing over time, in compliance to the set regulations.

Some of the good performers on this end, as noted on 16 July 2019 includes; Auckland International Airport Limited (ASX:AIA), which last traded at A$9.06, down by 1.415 per cent with a market cap of ~11.02 billion on the ASX. Another dual listed stock, a2 Milk Company Limited (ASX: A2M), stock last traded on 16 July 2019 at A$15.62, down by 1.451 per cent with a market cap of ~11.65 billon.

Another evolution has been on the technology front, with companies drifting towards acceptance and enhancement of the AI, VR and electric vehicles. The Australian economy is also on a verge to be a key player in the 5G phase and is moving with the world to contribute towards a sustainable environment by promoting and developing clean meat. On 16 July 2019, companies rich on the technical front includes; Appen Limited (ASX:APX) stock last traded at A$29.5, up by 0.17 per cent with a market cap of ~3.69 billion on the ASX. Another company, Syrah Resources (ASX: SYR), is a mining player focussing on mining and production of natural graphite for the EV revolution. On 16 July 2019, SYR’s stock last traded at A$1.03, up by 1.98 per cent with a market cap of ~356.75 million on the ASX.

On a rich global term and amongst the most recent events, the ASX witnessed the inclusion of Israeli companies, who have chosen to be listed on ASX to diversify their capital and take advantage of the liquidity offered by the exchange. The count of listed Israeli firms is around 15 as of 2019. Some of these are; Lithium-ion battery researcher UltraCharge Limited (ASX:UTR) stock which closed flat on 16 July 2019 at A$0.002, along with security tech company Dotz Nano Limited (ASX:DTZ) stock which last traded on 12 July 2019 at A$0.078 and HeraMED (ASX:HMD) stock which closed at A$0.195, up by 2.632 per cent with a market cap of ~17.51 million.

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