An equity investment in Australia is starting to look interesting for a seasonal trade.
North American investors can participate by owning Australian equities or Exchange Traded Funds that track the Australian equity market.
A major uncertainty for the Australian economy was eliminated on May 18. Australians surprisingly voted to re-elect a centre/right-leaning government with a majority. Polls prior to the election predicted a minority or left/centre-leaning government
On the charts, the Australia All Ordinaries Composite Index quickly responded to the news.
The Index broke above intermediate resistance levels at 6,481.30 and 6,477.90 to reach a 10-year high. Strength relative to the S&P 500 Index and TSX Composite Index turned positive. Short-term momentum indicators (Daily MACD, RSI and Stochastics) turned upward.
Seasonal influences for the Australian equity market are about to turn positive. Their period of seasonal strength on a real and relative basis is from mid-June to mid-October. Australia’s equity market seasonal pattern is unusual. Most equity markets in the world reach a seasonal peak early in May and a seasonal trough in mid-October.
Investors in the Australian equity market are watching developments on trade negotiations between China and the U.S.
Australia is a major supplier of commodities to China. A settlement of trade negotiations is expected to trigger a lower U.S. dollar and higher commodity prices.
Ironically, Australian commodity producers already are benefiting from negotiations. Chinese buyers of commodities are currently choosing Australian products over U.S. and Canadian products, particularly agriculturally.
The easiest way to invest in the Australian equity market is through an Exchange Traded Fund that tracks the Australian equity market. iShares offers the MSCI Australia ETF (EWA). Units are actively traded on U.S. exchanges and track Australian equity indexes closely.