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Good things, micro packages: Emerging companies index outperforms ASX 200 after ‘stellar rebound’

September 8, 2021

Good things, micro packages: Emerging companies index outperforms ASX 200 after ‘stellar rebound’

Australia’s microcap sector delivered outstanding results last financial year, rebounding after one of its most volatile 12 month periods the year before.

Australia’s microcap sector delivered outstanding results last financial year, rebounding after one of its most volatile 12 month periods the year before.

The ASX Emerging Companies index (ASX: XEC) lifted more than 50% during the 2021 Financial Year, easily outpacing the benchmark ASX 200 (ASX: XJO) index’s 24% gain – the biggest increase that index has seen since 1987.

“It’s actually outperformed the ASX 200 if you look at it on a 1 and 3 year basis,” said Coffee Microcaps founder and former Wilson Asset Management equity analyst Mark Tobin.

“But it had been lagging for a long time. It actually had a terrible rebound from the GFC. If you go back and look at the actual numbers for the years after – ‘08, ‘09, ‘10; 2011 the index was down 23%, 2012 it was down 8%, 2013 it was down 13%, 2014 down 10%.”

The index’s performance in the most recent financial year also follows from one of its most volatile periods, Mr Tobin noted, in which it delivered a return of roughly 27% despite suffering some of the worst single days of trading – and its worst month – in the index’s history.

In separate research, Mr Tobin found March 2020 was the worst performing month on the XEC’s record with the index’s absolute price return for the month down 31.05%.

A deeper dive revealed five of the index’ ten worst days all fell within that same 31 day block.

March 2020 also delivered the XEC its most volatile month in over 16 years, and this was borne out in the daily data, too. Scattered in amongst those five historically bad days were three of the index’s ten best days.

It is worth noting that these top and bottom ten days were compiled from more than 4,100 days’ worth of returns data.

“It was a crazy year,” Mr Tobin said.

 

 


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