Australian Shares Surge in FY2025; CBA Leads, CSL Struggles

Australian shares closed out the 2025 financial year with nearly 10% gains as Commonwealth Bank of Australia (CBA), gold miners, and e-commerce stocks soared, while education and mining shares slumped. The Australia 200 (ASX 200) index delivered nearly a 10% return, marking its best year since emerging from the depths of the Covid-19 pandemic in the previous financial year. Financial, telecommunications, and information technology stocks experienced significant gains, while the energy sector underperformed due to geopolitical tensions affecting the crude oil market.

Zach Riaz from Banyantree Investment Group highlighted the overall recovery in the market, noting that all markets are now in positive territory. Australian investors saw gains of 7.3%, with the US 500 (S&P 500) and US Tech 100 (Nasdaq 100) indices also returning to positive territory. The positive performance was driven by strong gains in stocks like Commonwealth Bank of Australia (CBA), which rose over 46% despite concerns about its overvaluation.

Analysts have cautioned about the high valuation of CBA, with the average broker recommendation being a ‘Sell’ due to concerns about the stock being overvalued. Despite hitting an all-time high in late June, some experts advise against buying the stock, citing limited potential for earnings growth. On the other hand, Evolution Mining, a gold miner, saw significant gains in FY2025 due to safe-haven buying and a rise in the price of gold.

Temple & Webster, an e-commerce retailer, also experienced substantial growth, rising over 100% in the past 12 months. Analysts remain confident in Temple & Webster’s future performance, with a ‘Buy’ recommendation and positive price targets. However, some caution that the stock’s valuation is demanding and faces challenges in maintaining market leadership.

On the other end of the spectrum, stocks like IDP Education and Mineral Resources faced challenges in FY2025. IDP Education struggled due to policy headwinds in major markets, while Mineral Resources saw a significant decline in share price. Analysts have varying outlooks on these stocks, with potential for a rally in IDP Education but caution surrounding Mineral Resources due to bearish forecasts.

Healthcare heavyweight CSL Limited ended FY2025 down almost 20% due to ongoing tariff uncertainty and US government policies affecting its revenue. Despite the decline, many analysts see upside potential for CSL, with target prices suggesting a 30% increase. The outlook for FY2026 remains optimistic, with the Australia 200 index starting the new financial year near its all-time high. Wall Street also saw record highs, with potential risks including geopolitical uncertainties and the impact of tariffs.

Julia Lee from FTSE Russell and Zach Riaz from Banyantree Investment Group both anticipate further gains in the market by year-end, with a correction expected midway through the next year. The expected rate-cutting cycle could benefit Australian investors, with upcoming capital projects in China supporting a positive market outlook. The August reporting season will be crucial for the Australian sharemarket, especially considering current high valuations.