International investors are increasingly shifting to domestic Australian equities, drawn by its resilient economy, undervalued currency, and insulation from escalating US-China trade tensions, according to Reuters.
The trend, while difficult to quantify due to limited real-time flow data, has propelled the S&P/ASX 200 to become one of the top-performing developed-market indices since April, trailing only Germany’s DAX with a 3.1% gain. In US dollar terms, returns exceed 6% when accounting for the greenback’s depreciation, a signal of growing appetite for alternatives to overheated US equities.
The appeal lies partly in Australia’s “mini United States” status, as described by Jupiter Asset Management’s Sam Konrad: a stable political climate under a re-elected centre-left government, fiscal stimulus driving 2024’s fastest quarterly growth in two years, and a currency trading near 20-year lows.
Domestic sectors—from banks to supermarkets—have particularly benefited, with foreign buyers injecting A$800 million into financial stocks like National Australia Bank in early 2025, per Macquarie data.
UBS’s Clinton Wong notes the ASX’s liquidity and minimal exposure to US tariffs (10% versus higher global rates) have amplified its defensive allure. Non-export-focused firms such as grocer Coles (+18% year-to-date) and telecom giant Telstra (+14%) have outperformed the flat broader market, reflecting demand for “sticky” investments shielded from trade volatility.
While mining and banking giants traditionally dominate the A$2.6 trillion market, global allocators are diversifying into consumer and service-oriented stocks. Morgan Stanley recently upgraded Australia to neutral, citing defensive qualities and boosting exposure to banks and retailers.
As trade war risks linger, the ASX’s blend of stability, yield, and currency appeal positions it as an unlikely haven in a fragmenting global order. Whether this marks a structural shift or a tactical pause, Australia’s market is no longer just about iron ore and coal.
