The S&P/ASX 200 Index (ASX: XJO) rallied strongly in March, but some ASX sectors did particularly well.
ASX shares gained nearly 7% in the month, which was around 320 basis points ahead of the S&P 500 Index, according to Macquarie Group.
The outperformance was even starker compared to the 7.7% crash in the MSCI China Index.
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Best performing ASX sector in March
ASX technology shares were the best performing sector in March as the group gained over 13%. Bargain hunting was a key driver for tech shares, as many had tumbled hard in the first two months of 2022.
For instance, the Block Inc CDI (ASX: SQ2) share price surged over 19%, while the WiseTech Global Ltd (ASX: WTC) share price added 17%.
The Computershare Limited (ASX: CPU) share price was another standout last month.
"CPU (+14%) was also an outperformer in March, supported by the rise in bond yields," said Macquarie.
"While strong, the returns from Technology have less impact on the overall market return as the sector accounts for <4% of the index (vs ~28% for the S&P 500)."
ASX sectors contributing the most index points last month
This means it was up to ASX mining shares and ASX bank shares to do the heavy lifting. Both of these ASX sectors were the largest contributors to the rise in the ASX 200 and All Ordinaries Index (ASX: XAO).
"We think Banks and Resources are benefiting from increased global interest, and that an increased allocation to Australian equities could come at the expense of markets with higher geopolitical risk (e.g. China) and/or net importers of commodities (e.g. Europe)," added Macquarie.
The ASX energy sector also contributed to the outperformance of our market. Russia's invasion of Ukraine has turned the energy market on its head. Russia is one of the largest oil and gas suppliers, and global sanctions threaten to cut off this major supply source.
Big earnings upgrades
The big run-up in energy and other commodities prompted Macquarie to double its ASX FY22 earnings per share growth estimate to 26%. This is due to upgrades for ASX resources shares.
On the flip side, the worst-performing ASX sector in March is real estate, noted Macquarie. This is due mainly to rising bond yields, although it may be too early to throw in the towel.
Don't count the worst-performing ASX sector out yet
"We note 2021 also saw a sharp bond yield spike early in the year, but that rebalancing of portfolios at the start of 2Q21 led to a decline in bond yields," said Macquarie.
"We think this could occur again, especially if we are right that there is a growth scare over the next 3-6 months, as global policy tightening, and high commodity prices are US growth headwinds."
While this ASX sector may have been out of favour last month, at least it still managed a 1% plus gain.
