Stellar gains in Australia's benchmark stock index have taken traders by surprise this month and analysts say the market finally appears to be reacting to a weak Australian dollar.
The S&P/ASX 200 index ended July with a gain of about 5.5 percent, the biggest monthly gain since November 2012. It was one of the best performing stock markets in the Asia-Pacific region in July.
"When you have the material, energy and financial sectors gaining 10 percent, 6.8 percent and 6.3 percent respectively, and given the weights these sectors have on the broader market, you can see why the ASX is on fire," said Chris Weston, chief markets strategist at trading firm IG.
Analysts said the strong rally in Australian shares was partly explained by investors picking up cheapened stocks after a steep sell-off in May and June and a big decline in the Australian dollar.
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The market outperformed most of its regional peers in July, with Japan's Nikkei ending the month little changed and the Shanghai Composite up about 0.7 percent. The Hang Seng index, like the ASX 200, ended the month with gains of just over 5 percent.
"We were trying to sell [Australian] resource stocks because of the weaker outlook for China's economy and we thought we were right, but got caught short," said Ben Collet, head of Asian equities at Sunrise Brokers in Hong Kong.
"The macro environment has improved a bit for Australia, but we have been a bit confounded about why it [the ASX 200] has been hanging in there," he added.