Share Market JUNE05

Quarterly market commentary to June 2005

Australian Shares

The Australian sharemarket had another positive quarter, up +4.7% as measured by the S&P/ASX300 Accumulation Index,

putting the finishing touch on another very strong financial year.

The quarter started off on a negative note with April being the worst monthly performance in over 2 years as the market

was dragged down due to signs of a slowdown in consumer spending. The April sell off was then completely reversed in

May and continued to strengthen through June with a number of key events buoying the market:

• No profit warnings from companies in the top 100 (except for Multiplex), in what is traditionally a “confession period” for profit downgrades.

• A generous May Federal Budget with the market anticipating greater sharemarket liquidity from personal income tax cuts, abolition of the super surcharge tax and the creation of a Future Fund for accumulated Budget surpluses to be used to Finance unfunded public super liabilities.

• The reinvestment of large amounts of cash from the recent bout of Merger & Acquisition activity.

• Expectations of significant changes in media, tax and industrial relations with the Coalition taking control of both upper and lower houses for the first time in 20 years.

• Record high oil prices, driving the Energy sector’s solid performance (up +15.9% for the quarter, the strongest performing sector).

• Likelihood of the Reserve Bank of Australia leaving interest rates on hold for at least the rest of 2005.

So with the market continuing to gain confidence, money flowed into the “safer” larger capitalisation stocks.Consumer

Discretionary was unable to recover ending the quarter as the worst performing sector, down -2.1%.

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