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Hotspots drive global market recovery

Global share markets

The bounce back in global share markets is not universal, with a few hotspots bringing up the average as some sectors continue to struggle.

Global share markets have recovered the losses suffered during the sharp coronavirus sell-off earlier this year, but much of the recovery has stemmed from strong performances by the US market, large tech stocks and government stimulus, according to a financial advisory firm.

Stanford Brown chief investment officer Ashley Owen said while global share markets returned 8 per cent in the September quarter, following returns of 19 per cent in the June quarter, “the rebound has been due to a tidal wave of support from governments and their central banks”.

“Global share markets are now ahead for the 2020 year to date – so they have now recovered from the sharp coronavirus sell-off in February-March. Not bad for the deepest economic contraction since the 1930s Great Depression,” Owen said in the firm’s most recent “Monthly Investment Markets Report”.

“Although the overall global share market is back above par for the year to date, the country-by-country picture is mostly still a sea of red ink,” he said, pointing out most individual European and Asian markets were still in negative territory for the year to date.

“This illustrates the extent to which the overall global market is being supported by the US market and the big tech stocks in the NASDAQ market in particular.

“The other star is China – both its domestic share market and foreign market, along with the perennially outperforming Denmark. South Korea and Taiwan are also ahead for the year, thanks to Samsung and Taiwan Semiconductor respectively.”

Owen added while there had been a strong focus on the decline of technology stocks in September, they remain ahead for the year, as well as ahead of the overall market.

“Many have benefited from changes in consumer spending patterns brought about or accelerated by the virus lockdowns. In addition, share prices of tech stocks across the board have benefited from new first-time speculative traders – in Australia and around the world – buying shares simply because they have gone up in price,” he explained.

Conversely, the stocks that have faced the largest falls for the past month, quarter and year have been oil and gas stocks, Owen noted, pointing out oil prices have fallen 35 per cent for the year so far due to industry competition and not the impact of the coronavirus.

“Local oil/gas stocks have been hit particularly hard, not just by the collapse in global oil prices, but also from the liquid natural gas (LNG) production war they started with Qatar, which used to be the largest global exporter of LNG until the massive increase in supply from a raft of new projects in northern Australia,” he said.

“Production from these new projects lifted Australia to number one global LNG exporter this year, but Qatar has hit back with announcements of new plants and price cuts to try to regain the top spot. Weak demand and increased supply spells more losses.”

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