The king of the Australian equity market during the month, again, was the bond market, with the sell off in bonds presaging a late month sell off in the equity market, led by the hitherto all conquering banks. Not far behind the king in influence was the crown prince of commodities, with commodity prices continuing to falter, and mining sector capex plans continuing to be wound back aggressively, seeing the second and third tier miners and mining service providers as battered as Greg Bird after State of Origin. No royal family is complete without a court jester leaving the assembly in stitches as they parlay their tomfoolery; the Federal Budget was released to rapturous silence during the month, and soon thereafter the Australian dollar dived, seeing foreign earning equities listed on the ASX keenly sought after. In all, this trinity of factors converged to produce an outsized return; just as was the case last month, albeit then on the less pleasant side of the ledger.
Valuing stocks on any basis other than the sustainable underlying cashflows produced, is playing with fire...
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