This article appeared in the July 2008 Listed @ ASX email newsletter.

2007/2008 financial year market performance

With world equity markets suffering from the effects of the US housing crisis, Australians have experienced the first full year of negative returns since FY03.

The S&P/ASX 200 index has fallen by over 2,000 points off its peak, wiping out two year’s worth of gains for investors. Despite current market conditions long-term investors have generated impressive returns from Australian equities. The graph below illustrates the outperformance of the benchmark S&P/ASX 200 index over major world indices this decade.


 

Capital raising slowed down in the second half of the year as ongoing volatility discouraged prospective floats and corporate actions. The official number of listings, for the financial year, of 236 was down on 284 in FY07. The market capitalisation of new listings was $11.2 billion, with an average and median value listed of $56 million and $11 million respectively. As the numbers suggest more than half the listings were junior mining and exploration companies. The resource theme looks set to continue with a strong pipeline of energy and materials companies seeking to list on the ASX in 08/09. In a challenging credit environment additional equity capital is an increasingly important source of funding for acquisitions, CAPEX and working capital for listed companies. In FY08 ASX companies tapped the market for $50.6 billion in follow-on raisings. This was lower than the record $58 billion raised in FY07, particularly in New South Wales and Victoria. Despite the market slowdown, interest in energy and materials allowed Western Australian companies to complete some major transactions and increase subsequent raising by 75%. Financials accounted for the largest share of subsequent issues, followed by the materials and consumer sectors. As a sub-sector A-REITs were particularly active, raising $9 billion, in a difficult year. At the company level Wesfarmers, Newcrest and CBA were among the largest issuers.

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