Australia’s share market is the world’s best since 1900

ASX shareholders will be pleased to hear they’re invested in the planet’s best country for stock returns. Here’s why.

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Australia has been crowned the best-performing equities market in the world since 1900.

The finding came in the latest Credit Suisse Global Investment Returns Yearbook 2021 report, released Friday.

It reported that Australia came out on top among 23 countries over 121 years in US dollar terms.

In local currency terms, Australian shares returned a real return of 6.8% per year since 1900, to come a close second after South Africa.

“We also rank second lowest in terms of volatility,” said Credit Suisse Australia private banking chief investment officer Andrew McAuley.

“Australia has achieved this remarkable outcome due to a number of factors. The sectoral composition of the market has played a key role as the world economy transformed and progressed over the past 121 years. Financials, materials and health are the largest segments of the Australian equity market.”

In real dollar terms, the Credit Suisse report found $100 invested in 1900 in the Australian market would now be worth $280,600.

Credit Suisse Australia head of equities Mark Davis attributed Australia’s success to “strong fundamentals”.

“A healthy and resilient services economy, a commodities sector linked to the growth economies of Asia, and our robust banking sector, all of which is supported by a flexible monetary set up, a long standing democratic political system that has the full support of the majority of our population, and a transparent legal and regulatory framework.”

For similar reasons, the New Zealand share market also performed well, coming in fourth in performance since 1900. It returned 6.5% per annum in New Zealand dollars.

How the Australian share market fits into the global scene

The Australian share market, which is currently dominated by ASX Ltd (ASX: ASX), used to be split into smaller exchanges in each of the states. The ASX was formed in 1987 after a merger of the state capital city exchanges.

The Aussie market is now the ninth-largest internationally. The United States still accounts for more than 56% of the global market capitalisation. Japan takes up 7.4%, China has 5.1% and the UK is fourth with 4.1%.

In a world far more globalised than 120 years ago, Australian shares represent an attractive destination for both foreign and local capital, according to Davis.

“The just completed Australian company reporting season, for example, represents the fastest company earnings recovery in ASX history, with aggregate earnings revised upwards by 6%.”

Internationally, shares were the best performing long-term investment instrument over the last 121 years, returning 5.3% per annum in real US dollar terms. Bonds returned 2.1%.

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Returns as of 15th February 2021

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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