The Australian stock exchange is relatively resistant to declines

With stock prices falling in the US, investors are looking for alternatives. It may be Australia - the 8th largest stock market in the world, one of the few that did not record any declines until recently. On May 21, Australia faces parliamentary elections that could lead to a change of government.

Be sure to read: Australian companies - an interesting idea for portfolio diversification

Australia is much less overpriced than the USA

Australian stocks are an interesting alternative to the American or European markets. Until recently, the entire market recorded increases. It is different now and the main Australian ASX200 index has been down 6,3 percent since the beginning of the year. However, at the same time, the S & P500 index lost 16,4 percent.

Australia did better than other markets thanks to the large representation of commodities companies that have recently achieved record results. There are also few companies from the technology industry that have recently recorded the largest declines. And 1/3 of the market are companies from the financial industry, whose income largely comes from Australia itself. Financial companies are gaining thanks to the commenced cycle of interest rate increases. Only about 40 percent. Australian companies' sales come from outside Australia, making them much less prone to global problems. The companies from the raw materials market, although presenting great results, remain largely related to the situation in China. They are exposed to the effects of the downturn and fall in demand in China, and vice versa, if the restrictions were lifted, demand and profits could increase rapidly.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

Interest rates, inflation, elections

In early May Australian central bank (RBA) raised interest rates for the first time since 2010. There was an increase by 0,25 pp by raising interest rates to the level of 0,35 pp. And this is probably just the beginning of the increases, because the bank wants to fight the rising inflation, which recently amounted to 5,1%.

On Saturday, May 21, Australia is facing federal parliamentary elections, which may result in the seizure of power by the opposition Labor Party from the hands of the Liberal-National coalition, which currently has a single-member majority. However, as in many other countries, the policy differences between the major parties are limited, with both focusing on reducing the cost of living for consumers and increasing access to the housing market. Therefore, it seems that elections, even those resulting in a change of government, should not bring about significant changes in the economic policy.

Expensive raw materials help the economy

High commodity prices and a rate hike helped keep the Australian dollar high against the rising US dollar this year. The Australian dollar lost only 4 percent. against its American counterpart, much less than the currencies of other developed countries

Australia's significant raw material exports, ranging from iron ore to natural gas and coal, are estimated to account for a 20% increase in Australian companies' profits. this year, which is twice the average global growth. The C / Z (P / E) ratio for the entire parquet is around 15, which is close to the global average. For the largest company on the stock exchange - BHP Group (Health and Safety) is 8, with 9 percent. dividend rate.