- The ASX 200 has delivered a peak YTD return of 15.4%.
- The top 4 contributors of the ASX 200 are up by more than 100%.
- The ASX 200 has retraced almost 4.67% from its all-time high, making the peak of 7,632.8 a major resistance level.
Australian benchmark index, the ASX 200, rallied all the way to its all-time high of 7,632.8 on 13 August 2021. The peak YTD return for 2021 has been a decent 15.4%. However, the recent correction to 7,275.6 has reduced the year-to-date return to 12.1%. In the last month alone, the index is down 3.05%, in sync with the sell-off in global markets, primarily due to worries that China’s Evergrande may default on its massive debt of US$304 billion.
So which stocks have helped the ASX 200 surpass 7,600-mark this year?
The top 5 largest gainers of the ASX 200 this year which have contributed to the ongoing bull run were:
Data Source: Refinitiv Eikon
These might seem a few outliers from the pack of 200 stocks that have done exceptionally well this year. But what about the entire market breadth of the ASX 200? Out of all 200 stocks in the benchmark index, 133 stocks are comfortably trending above their respective 200-average, which is an objective measure to define stocks in a bull run.
So, what’s fueling the rally?
The historic low level of interest is one of the key reasons behind the rally. The government’s push to steer economy back on track required it to make severely cut lending rates to stimulate the investment cycle.
Image Source: © Yalcinsonat | Megapixl.com
Another biproduct of severely low interest rates is that investments in bonds or other debt securities don’t seem lucrative as compared to earlier. This led to a massive flow of money into equity markets, which helped the benchmark index to scale new heights.
What’s ahead? Is 10,000-level in sight?
Technically speaking, the ASX 200 has retraced almost 4.67% from its all-time high, making the peak of 7,632.8 a major resistance level. Unless the ASX 200 breaches this level, even the nearest 8000-mark seems a bit of a hassle for the index.
The commodity-led rally that fuelled mining giants during the start of the year have also started to see profit booking. Heavyweight miners such as BHP Group Limited (ASX:BHP), RIO Tinto Limited (ASX:RIO) and Fortescue Metals Group Limited (ASX:FMG), have all fallen to double-digit negative YTD returns.
Moreover, as the economy is progressing through the COVID-19 vaccination drive and it is also set to reopen sooner or later, interest rates would also revert to mean, making debt investments lucrative again. The time RBS starts bumping up interest rates, a decent outflow from equities could be expected.
Although the market has scaled quite swift towards the 7,600-mark, reverting back of interest rates, a technical resistance of around the 7,600-mark and heavyweight miners losing their ground mid-way during the rally would make it difficult for the ASX 200 to reach the 10,000-mark in the near future.