Kieran Salsone

Year ends with happy returns to investors

IN 2012, the Australian sharemarket turned in its best performance since 2009 as interest rates fell and investors chased higher-yielding stocks.

The benchmark S&P/ASX 200 Index lost some ground in a shortened trading session on Monday, but finished the year 14.6 per cent higher at 4648.9 points in a ''good, sustainable performance'' that was ''not just a one-hit wonder'', CommSec chief economist Craig James said.

''The Australian sharemarket had a good year, perhaps not a great year, but certainly a much more positive year for investors,'' Mr James said.

The search for yields drove the market higher over the second half of 2012, after tight monetary policy settings, a high Australian dollar and concerns over China's economy weighed down the market in the first half, Arab Bank Australia treasury dealer David Scutt said.

''It really was a tale of two halves,'' he said. ''Once we saw the European market come down and saw that the Chinese economy appeared to have bottomed out, people switched out of the safety plays and moved into the banks and telcos looking for yields. And that's really what has driven the market higher over the second part of the year.''