XSO Small Ords still in a downtrend

[IFocus]

I watch the small ords and the bottom of the market as a reality check while the top end attracts yield chasers and there have been some nice movers in the middle the market over all remains not quite right to me..........IMHO



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[nulla nulla]

Coincidently Rod Myer has written an article about the Small Ords performance (XSO) v's the All Ords (XAO) in this mornings "Money" section of the Sydney Morning Herald. The XSO appears to have been tracking the XAO until about 2012/2013 when it started diverging downward while the XAO climbed. Big Banks, Big Miners and Finance are doing well while smaller companies are not.

http://www.smh.com.au/money/investing/small-companies-are-doing-it-tougher-20140605-zryms.html

 

[VSntchr]

At first thought, is this influenced by a large number of speccy miners that are included within that index?

I understand that the XAO does have miners too, but these are the big guns that will probably not create as much of a drag on their indicies.

 

[craft]

At first thought, is this influenced by a large number of speccy miners that are included within that index?

I understand that the XAO does have miners too, but these are the big guns that will probably not create as much of a drag on their indicies.

The biggest difference in Sector weightings between the XAO and XSO is Financials: 42.9% for XAO compared to 16.1% for XSO.

Difference in materials exposure is minimal 16.5% for XAO and 18.7% for XSO

Comparatively, the overweights to make up for the underweight financials come from consumer discretionary (+18.8) and industrials (+8.8).

How can a banking sector be so much more healthy then the economy it services? Chase for yield in perceived low risk assets is well, risky.

 

[IFocus]

I think it just shows the Australian market is still risk adverse but from pass cycles I don't remember to many times a move up by the major index's and such a divergence in the bottom end.

 

[Faramir]

Can I make an assumption?? If a major correction was to appear, would XSO Small Ords be likely to suffer less than XAO because "the bombs never hit you when you're down so low." This statement correct or very incorrect?? If money ever flows out of big caps and back into Term Deposits (I personally cannot see this happening in a very long time), will they converge again and the gap returns back to "normal".

While things are OK, it seems better to "take your money out of the bank and buy their shares".

 

[IFocus]

Can I make an assumption?? If a major correction was to appear, would XSO Small Ords be likely to suffer less than XAO because "the bombs never hit you when you're down so low." This statement correct or very incorrect?? If money ever flows out of big caps and back into Term Deposits (I personally cannot see this happening in a very long time), will they converge again and the gap returns back to "normal".

While things are OK, it seems better to "take your money out of the bank and buy their shares".

Falling markets particularity ones gathering speed tend to be all about risk. The bottom end is always vulnerable to market adjustments, I don't ever remember any advantage in the small caps during market weakness.
Agree about the term deposits while we remain in a low interest environment, wonder all the time if we will have a bang moment with raising inflation some where down the track.

 

[So_Cynical]

At first thought, is this influenced by a large number of speccy miners that are included within that index?

Skeccy miners = prospectors with nothing, and a lot of smaller mining services stocks plus bio techs with nothing.

Perfect storm of nothingness.

 

[burglar]

At first thought, is this influenced by a large number of speccy miners that are included within that index?

I understand that the XAO does have miners too, but these are the big guns that will probably not create as much of a drag on their indicies.

My mentor would describe a miner as "a liar standing next to a hole in the ground!"

:

 

[IFocus]

XSO looking to move up with the DOW smashing its way up I wonder if we will see more confidence come into the bottom end of the market?

Still to break out of the down trend.

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[rimtas]

I think I have an explanation what is happening when a small Companies are underperforming.

From a Socionomic perspective, when the crash occurs(think 2009), owners of small companies are the ones who are affected the most and those who survive usually develop a long lasting caution in their brains, they are sceptical about recovery, they are not in a hurry to invest in or expand their businesses. They usually wait till the moment when there is widespread economic recovery.
After that small caps start to accelerate very fast and in a short period of time they are a big winners outperforming Big Caps. This is typical for bull markets, just I am not sure are we in one right know or not.

 

[IFocus]

XSO has finally broken free of my pitch fork down trend line.

Waiting see if a higher low forms hopefully this period will form some nice consolidations for some low risk entries to hitch a ride higher.

 

[Wysiwyg]

XSO has finally broken free of my pitch fork down trend line.

Waiting see if a higher low forms hopefully this period will form some nice consolidations for some low risk entries to hitch a ride higher.

2280 to 2290 has posed as resistance for this third time but certainly that 2 1/2 year DT line has been broken. What else could happen from here?

1) XSO could break through that resistance and continue higher
2) XSO could break through that resistance and pullback to this previous resistance area
3) XSO could fall back to the 2 1/2 year trend line area as support

 

[Dona Ferentes]

ten years after


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"When we look at long term averages for these indices, we come to expect a return closer to +8.0% p.a. Over the past 10 and 20 years, the return of the S&P/ASX Small Ordinaires Accumulation Index (XSOAI) has been +6.8% p.a. and +8.4% p.a. respectively.

Delving further into the data, we can see that if we split out the smallest businesses within the XSOAI index, the underperformance has been much more significant. The diagram ... looks at the return profile of every business within the S&P/ASX All Ordinaires Index (XAOAI) for CY23 and allocates each business into a bucket based on the size of the business. As the majority of NAOS investments are within the <$250 million ‘micro-cap’ bucket, the yellow dots are of the most relevance. The average CY23 return of all the yellow dots is -34.2%, compared to +21.6% and +18.6% for the Very Large Cap (>$10bn market cap – blue dots) and Large Cap ($1bn to $10bn – grey dots) companies respectively.
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from NAOS quarterly report