Omicron took the edge off the Australian share market in November causing it to finish with a small loss of 0.9% or a narrower 0.5% after dividends are included. However, year to date, it is still returning a healthy 14.1%. Roll on the bull market!

Looking at the industry sectors, the most interesting performance has been that of the real estate sector, which is comprised mainly of listed real estate investment trusts. It returned 4.3% in November and has added 17.7% over calendar 2021.

                                                Industry Sector Returns

Due to covid, many had written off commercial office buildings and retail shopping centres. The two permanent changes arising from the lockdowns – an increase in people working from home and online shopping – were expected to stifle valuations and rents as landlords dealt with higher vacancy rates. And while vacancy rates increased, this did not translate into a fall in valuations as mainly foreign buyers bid aggressively for commercial buildings.

Dexus and GPT, the two largest diversified commercial property groups, are both up by more than 17% this year. Shopping Centres Australasia Property is up by 10.2%, while the owner of the Westfield shopping malls, Scentre Group, is higher by 11.1%.

The real stars have been those groups that have invested heavily in industrial property and logistics warehouses. Goodman Group, which is now the largest real estate company by market capitalisation on the ASX, is up by 30.6% while Charter Hall has added 31.3% in 2021.

Another sector that has “starred” has been communication services. Dominated by Telstra and the REA Group (realestate.com), the sector is the best performing on the ASX with a total return of 31.6% for the eleven months to the end of November. Telstra, which started the year at $2.98, closed the month at $4.07. With dividends of 16c per share, this brings the total return to 41.9%.

The largest sector on the ASX by market capitalisation, financials, which makes up almost 30% of the S&P/ASX 200, has returned 20.1%. This is despite a sharp fall in November of 6.9% following disappointing profit reports from CBA and Westpac. Both showed the impact on net interest margins caused by borrowers switching to lower margin fixed rate home loans.

Resource stocks are by in large in the black, notwithstanding the mid-year plunge in the iron ore price from US$220 per tonne to less than US$90 per tonne. But with the price starting to stabilize around US$100 per tonne, boosted by the announcement from the world’s largest producer, Brazilian miner Vale, that it was lowering production guidance for this year and the next, the iron ore majors rose in November. The materials sector, which also includes gold miners, packaging companies, steel companies and building material providers, recorded the best monthly rise of any sector in November with 6.3%.

Laggards in 2021 are the two smallest sectors on the ASX, utilities and energy. Both have felt the impact of investors selling due to ESG (environmental, social and governance) concerns. Energy is the only sector in the red with a negative return of 1.7%, somewhat surprising given that the underlying benchmark crude oil price is higher over 2021.

And despite a very strong lead from the US, where the information technology sector is up by 29.1% in 2021, the local Australian sector shows a meagre return of 3.3%. The broader and comprehensive S&P/ASX All Technology index is more favourable with a gain of 8.6%.