Backwater to breakout: Investors pivot to Australian small caps as blue

By Rajasik Mukherjee

(Reuters) -Long overlooked as the backwater of the Australian equity market, small-cap stocks are having their best run in over a decade due to strong earnings and growth potential, as pricey blue-chip stocks have sent investors seeking value elsewhere, fund managers say.

Powered by robust earnings, easing interest rates and a policy tailwind for critical minerals, the ASX Small Ordinaries Index, which tracks companies valued at between A$200 million ($130 million) and A$10 billion, has raced ahead with a nearly 21% gain since the start of this year. That sharply outpaced the ASX 200 benchmark index’s return of about 8%, both as of Wednesday’s close.

By that measure, the small-caps index is headed for its best year since 2009, reflecting an aversion among some parts