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The running of the bulls at ASX!

2003 was an extraordinary year which saw a number of records set and milestones reached by the Australian sharemarket. For most investors, though, it will be most remembered as the year when the bear market was reversed with the All Ords up and the return of a bustling market for IPOs.

One of the strongest trends to emerge was the level of interest from retail investors in not just shares but also options, warrants and other ASX markets.

In this article we will look at how the market performed during 2003 and the some of the year's highlights.

The performance of the Australian market was recognised on a global level by the inclusion of S&P/ASX 50 into the S&P Global 1200 and ASX reaching eighth position in the Morgan Stanley Capital International (MSCI) index in May and September. The MSCI index is used as a measure of global capital markets.

ASX's derivatives markets were also recognised by 'AsiaRisk' magazine, who awarded the prestigious 'Derivatives Exchange of the Year' for 2003. They said "ASX has continued to make strong inroads in its plans to strengthen its derivatives capabilities", citing the developments in futures such as electricity, agricultural and property trust contracts as major factors.

The benchmark All Ordinaries index progressed from 2975.5 in January to close at 3306.0 in December (11.1% up over the year). Of great significance was the growth in interest from 'mum and dad' investors for not only the share market but also in alternative investments such as Options, Interest Rate Securities and Listed Managed Investments. Even more encouraging, this trend was reflected by increased interest in ASX classes covering these investments.

Selected features of 2003: 
It was an excellent year for share investors and companies, particularly in the last 6 months, when improved financial performances were often recognized and rewarded by the market. Some highlights included:

  • The market hit a record in terms of value of trading with $56 billion worth of shares traded during October. Indeed, August 29 was the second busiest trading day ever, with more than 102,000 trades ? just shy of the record set on 30 June 2000, when more than 103,000 trades were executed.
  • As at December 31, there were 124 new listings on ASX for 2003. Of these listings, 96 occurred since 1 July. Over $6 billion was raised between January 1 and December 24 2003 via floats on ASX.
  • Many of these were small mineral exploration companies, notably in nickel and gold, but there were also a number of large "marquee" names who made their debut. These included Promina Group ($1.9 billion), Multiplex Group ($900m), Australian Leisure & Hospitality Group Limited ($881m) and Virgin Blue ($673m), who inevitably took the prize for the most colourful launch.

Also benefiting from the increased interest from mum and dad investors was the Options market, where they now account for 68% of options market activity - and this trend does not look like abating. A number of records were set during the year, including:

  • August 28 when a record for the number of option contracts traded in a single-day was set, with 151,121 option contracts traded. This was primarily driven by activity in AMP shares. As usual, trading activity and media attention on the underlying equities inevitably produced similar "activity spikes" in associated derivatives.
  • Over the year average volumes were up 1.3%, at more than 67,000 contracts per day. The retail investors' favourite, Index options, were the star performer with the volume of options traded over the S&P/ASX 200 Index up 74 percent over 2002 levels. 

The Listed Managed Investments (LMI) market continued to grow, trading increasing by 25% over the past year. ASX now offers more than 115 LMI product offerings with a total market capitalisation of more than $75 billion. Total market capitalisation of LMIs grew 16.9% from $65 billion to more than $76 billion.

Over $4 billion was issued in the ASX Interest Rate Market in 2003, bringing its capitalisation to more than $18 billion (up from just $7 billion when it was first established in 1999).

Another highlight during 2003 was the issuing of over $130 million investment-grade rated credit-linked notes. These are traditionally wholesale investment products and are expected to grow in popularity as retail investors seek higher yielding investments.

The Warrant market continued to develop, boasting a record 1,396 warrant series available for trading on ASX by the year's end. During 2003 instalments turnover reached a record of $214 million in October. A number of new style warrants became available, including: Self-Funding Instalments (where the cash component of any dividends are used to reduce the loan amount), gold warrants, and European-style Knock-Out Warrants.  The Knock-Out Warrants are suited to active investors able to track the price of their investments on an intra-day basis.

Grain Futures began trading in May, and open interest has steadily climbed to more than 8,000 contracts outstanding, representing 160,000 tonnes of grain. In September wool futures contracts were launched, using the specifications used on the Chinese export market (China is the largest importer of Australian wool). 

Overall, 2003 was a good year for investors in the Australian sharemarket. To find out how to enjoy the same success this year as last, or improve your returns, investigate the Investor Education ASX offers by visiting the links above, or call ASX on 131 279.

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