Key takeaways:

• Iron ore stocks benefitted from China reopening, but the Selfwealth community took profits

• While the market heavily discounted lithium stocks, Selfwealth members embraced buying opportunities in the segment

The Australian share market ended the year on a downbeat note in December. Following two months of strong gains, the benchmark ASX 200 index declined by 3.4%.

Tech shares felt the heat last month, with pressure stemming from a sharp sell-off in the Nasdaq Composite. However, just about every other major sector finished in the red as well, indicating the broad-based nature of the sell-off. 

Discretionary retailers, health care, and financials were among the worst hit, while strong gains for iron ore stocks masked a dour result from lithium names in the materials sector. Investors were concerned about the interest rate outlook in the US, with a recession in 2023 growing more likely.

How did Selfwealth members reposition their portfolios to end the year? Let take a look.

What are the most popular ASX shares and ETFs?

Once a permanent fixture atop the list of the most popular holdings in the Selfwealth community, CSL (ASX: CSL) now finds itself down in fourth spot. That result is the lowest-ever ranking for the biotechnology giant, as measured by the total value of CSL holdings across the community. 

It follows a 6% decline in CSL shares in December, with the stock gradually losing some of its appeal over the course of 2022 given the relative outperformance of other favourites. Its peers at the top of the list all posted a share price gain across the year.

On that note, BHP (ASX: BHP) jumped into second spot among the most held stocks. Although its shares finished flat for the month, community interest flowed through to the stock on account of the performance of the rest of the iron ore sector in December. A snap decision by the Chinese government to effectively abandon its COVID-zero strategy supported iron ore prices. 

The market took an axe to lithium stocks during December, which ultimately weighed on the overall value of holdings across a number of popular names. 

Pilbara Minerals (ASX: PLS) fell from 11th to 13th position, with the stock tumbling 19.5% month-over-month. The lithium producer was impacted by a weaker-than-expected lithium auction result, with prices retreating versus the prior auction. 

Further down the list Core Lithium (ASX: CXO) fell two spots from 17th to 19th position, with a 25% slump in its share price outweighing what was otherwise strong buying interest from Selfwealth members.

Elsewhere, Washington H. Soul Pattinson and Co (ASX: SOL) and Woolworths (ASX: WOW) both improved two places to 16th and 18th positions respectively. 

The former was helped by a strong showing from its major stake in coal exporter New Hope (ASX: NHC), where it owns a 40% stake in the business. On the other hand, Woolworths shares actually decreased over the course of the month, but new buying support, likely driven by investors eyeing more defensive' exposure in their portfolios, offset that.

Last but not least, Qantas (ASX: QAN) finished the year inside the top 20 for the most popular holdings. The stock has drifted just outside the leaderboard since its exodus in February, which followed a period in 2021 where it was a regular sighting. Qantas was one of just a small number of blue-chip stocks that delivered gains in 2022, so investors may be anticipating a better year ahead for the national airline, which was plagued by operational setbacks.

All of the leading ETFs recorded a net outflow in monetary value last month, which was directly attributable to the weak performance of markets both home and abroad. The largest outflows were recorded among stocks with exposure to the US market.

The value of holdings in the Betashares Nasdaq 100 ETF (ASX: NDQ) declined by 4.4%, there was a 3.9% fall for the Vanguard U.S. Total Market Shares Index ETF (ASX: VTS), and there was a 3.2% outflow for holdings of the iShares S&P 500 ETF (ASX: IVV). This was largely due to the underperformance of tech stocks last month as interest rates look set to stay higher for longer. 

ASX share trading activity

Although iron ore stocks were one of the best performing market segments in December, Selfwealth members sold more shares in these companies than they bought. The buy-to-sell ratio for the likes of Fortescue Metals Group (ASX: FMG) and Rio Tinto (ASX: RIO) was well below 50%, which suggests selling dominated money flow for these shares. 

One possible reason for this is because members were taking profits in these stocks as their share prices climbed. Alternatively, investors may have reassessed the outlook for the segment in light of the mass COVID outbreak across China that threatens its economic recovery in the near-term.

These factors may have also played a part in above-average trading interest in South32 (ASX: S32). The mining and metals exporter, which has exposure to bauxite, alumina, aluminium, copper, silver, lead, zinc, nickel, and coal, is in some ways a barometer for the economic outlook. With a buy-to-sell ratio of just 41.5% last month, that suggests some pessimism regarding not only the company near-term share price, but also the direction of the global economy amid China COVID battle.

Meanwhile, investors heavily bought stocks that were sold down sharply across the course of the month. We mentioned earlier that Pilbara Minerals and Core Lithium attracted strong buying support despite the broader market aggressively selling these names, but this was also the case for banks like Macquarie Group (ASX: MQG) and Commonwealth Bank (ASX: CBA), which stumbled during the market sell-off.

Further down the list, Evolution Mining (ASX: EVN) made a rare appearance among the most actively traded stocks by value. Down in 17th spot, EVN was a focal point in the gold sector last month, gaining 10.8% as the price of gold passed US$1,800 per ounce. The stock also hit a six-month high, prompting profit taking, as well as new positions by investors that believe the price of gold has more room to rally.

That all for this Trade Trends report, stay tuned for the next edition this time next month!