Australia | Sep 22 2014
By Mathan Somasundaram, Baillieu Holst Quant Strategy
Summary: Aussie market seems to have broken the recent down trend and followed the positive global lead. We turned short term positive on Wednesday with market having a panic sell day before FOMC meeting. Markets are happy that the rate rise is at worst the second half of 2015 story…but given the rates indicated…it may be faster if the economy recovers better than expected. The markets globally are in uncharted territory in regards to money printing, interest rates, currency manipulation, low inflation, low growth, high unemployment and real wages decline.
China is providing more liquidity and rate cuts to stimulate domestic spending while Euro is expected to deliver substantial QE. Given the recovery is mainly in US, and that is below trend, it is hard to see the rest of the regions not taking a belting on growth without extra help as US winds liquidity down. Central banks once again have coordinated the handover of liquidity from one region to another to keep the show going.
Global investors were selling out of Australia on the currency worry, but that seems to have subsided. Market is trying to switch from yield to growth, but struggling to find any cheap quality growth. We expect the market to get back to good quality growth and yield stocks after recent selloff. BHP and RIO remain buy ideas when you look at the supply/demand and volume/margin dynamics. Given the drop in energy prices and the valuation of the energy stocks, STO and WPL are likely to see selling pressure to fund BHP and RIO.
AUDUSD held just below 90 cents and we expect it to hold around these levels in the short term and then slide down to mid 80’s. We continue to see substantial risk in the domestic economy and do not expect the corporates to show animal spirit till government offers leadership and structural improvement.
Trading idea of the day: Henderson Group (HGG) – HGG is an international UK based fund manager listed on the ASX and LSE. It is the holding company of the investment management group Henderson Global Investors. HGG provides investment management services throughout Europe, North America and Asia. We see the stock re-rating to $5 with UK/Scotland voting to stay together, Euro QE, AUDGBP falling and strong funds flow.
Market Move: Aussie market was up 0.32% with turnover was just below $5.6bn.
This document has been prepared and issued by:
Baillieu Holst Ltd
ABN 74 006 519 393
Australian Financial Service Licence No. 245421
Participant of ASX Group
Participant of NSX Ltd
Reprinted with permission of the publisher. Content included in this article is not by association the view of FNArena (see our disclaimer).
Disclosure of potential interest and disclaimer:
Baillieu Holst Ltd (Baillieu Holst) and/or its associates may receive commissions, calculated at normal client rates, from transactions involving securities of the companies mentioned herein and may hold interests in securities of the companies mentioned herein from time to time.
No representation, warranty or undertaking is given or made in relation to the accuracy of information contained in this advice, such advice being based solely on public information which has not been verified by Baillieu Holst Ltd. Save for any statutory liability that cannot be excluded, Baillieu Holst Ltd and its employees and agents shall not be liable (whether in negligence or otherwise) for any error or inaccuracy in, or omission from, this advice or any resulting loss suffered by the recipient or any other person. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a
judgment at its original date of publication and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in
this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Baillieu Holst Ltd assumes no obligation to update this advice or correct any inaccuracy which may become apparent after it is given.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
