Big four back in favour for investors

Original article by Scott Murdoch
The Australian – Page: 17 & 20 : 11-Feb-19

Australia’s banking index gained six per cent in the week ended 8 February, with the rally being attributed to renewed interest in the sector among international equity investors. Rahoul Chowdry of law firm Minter Ellison notes that sovereign risk concerns regarding Australian banks have abated following the release of the financial services royal commission’s final report. Mike Evans from the Bank of America Merrill Lynch and Marianne Birch of Macquarie Capital agree that the final report has created greater certainty for investors.

CORPORATES
MINTER ELLISON, BANK OF AMERICA AUSTRALIA LIMITED, MERRILL LYNCH (AUSTRALIA) PTY LTD, MACQUARIE CAPITAL PTY LTD, AUSTRALIA. ROYAL COMMISSION INTO MISCONDUCT IN THE BANKING, SUPERANNUATION AND FINANCIAL SERVICES INDUSTRY, CITIGROUP PTY LTD

Global dividends on the rise

Original article by David Rogers
The Australian – Page: 27 : 8-Feb-19

Data from Plato Investment Management shows that dividends increased across the majority of developed markets in 2018, with a total payout to shareholders of $1.8trn. Globally, companies in the information technology sector increased their dividends by 33 per cent in the December quarter, followed by consumer staples (up 17.9 per cent). The global materials sector is the only one that did not record growth in dividend payments. In contrast, Australia’s materials sector recorded year-on-year dividend growth of 26 per cent.

CORPORATES
PLATO INVESTMENT MANAGEMENT LIMITED, STANDARD AND POOR’S ASX 300 INDEX, BROADCOM CORPORATION, VISA INTERNATIONAL

Aussie trades at fresh 32-month lows before recovering post US GDP – AFEX Monday Update – October 29, 2018

The AUD/USD chart resembled a roller coaster on Friday.  Initially the bears were in control, pushing new lows, however the bulls later gained the ascendancy in the US session helping the Aussie dollar recover from its initial losses and close the week relatively unchanged.

Earlier in the day the AUD hit fresh multi-year lows as risk-aversion swamped the markets.  Equities reversed early morning gains and currencies were swept up in the carnage.

The moves caught many off-guard due to the lack of volatility throughout the week.  Up until 2pm AEST on Friday the weekly range was a mere 72-points and tracking a similar weekly trade range to the week prior, which was the lowest weekly range since 2002.

However the weight of equity market turbulence took its toll, alongside a weakening Chinese yuan that touched it’s lowest level since January 2017.  This saw the AUD sell-off quite suddenly, pushing through the weekly lows at 0.7052 and quickly surpassing the monthly lows at 0.7040, taking out traders stop loss positions which exemplified the moves and test towards psychological support at 0.7000.

But after the release of US 3rd quarter GDP on Friday night the US dollar sold off across the board, enabling the Aussie to bounce off the low of 0.7021 and push all the way back above 0.7100 before closing the session at 0.7087.

Whilst the headline release of 3.5% growth versus 3.3% expected was quite strong, delving into the data traders saw that a considerable portion of growth came from increased inventories whilst exports declined, and thus took the position that the number was overstated and at risk of declining at the next read, and sold their USD holdings accordingly.

Looking ahead and the economic calendar is quite a lot busier than last week.  On Monday the US releases core PCE, the Fed’s preferred measure of inflation, followed by consumer confidence data on Tuesday.  This leads into Australian inflation data on Wednesday which is quickly followed by Chinese manufacturing and services data.  Later that night the US will publish quarterly wage price data, followed by Australian retail sales figures on Friday ahead of US employment numbers.

Given how close traders came to testing 0.7000 on Friday, any negativity in domestic data or strength in US data would likely see that figure tested again.  If it does break through 0.7000 the next key level of technical support coincides with the August 2015 low at 0.6907.  Thereafter and the January 2016 low of 0.6827 is the next key figure to watch.  Whilst the trajectory is for a lower AUD, a break back above 0.7160 could help the Aussie recover in the short-term, although I imagine any rallies will be met by sellers who appear in control at this time.  A sustained move towards 0.7300 could change this view, but the likelihood of this happening looks quite remote given current price action and most market participants still favour a lower AUD from here.

James King
Head of FX Dealing, AFEX
www.afex.com

‘We’re in the eighth inning’: Oaktree chief wary of bull run

Original article by David Rogers
The Australian – Page: 17 & 28 : 23-Oct-18

Oaktree Capital Management’s co-founder Howard Marks says current financial market conditions favour a defensive investment style. Marks warns that although the bull market may continue for some time yet, the chances of a bear market are increasing. He describes quantitative easing in the wake of the global financial crisis as a "massive experiment" that succeeded, but he says the impact of quantitative tightening is uncertain.

CORPORATES
OAKTREE CAPITAL MANAGEMENT LLC, CITICORP, STANDARD AND POOR’S 500 INDEX, SHANGHAI COMPOSITE INDEX, MSCI EMERGING MARKETS INDEX

Surging bond yields to test stock bulls’ mettle

Original article by David Rogers
The Australian – Page: 30 : 18-May-18

The yield on US 10-year government bonds peaked at a new seven-year high of 3.12 per cent in Asian trading on 17 May. Given the low level of sharemarket volatility at present, there is the potential for a correction, as was the case in February when the bond yield rose to 2.9 per cent. A growing number of market watchers are advising investors to retain overweight positions with regard to equities in the current environment, while Ric Deverell of Macquarie Group expects the 10-year bond yield to rise toward four per cent in the medium-term.

CORPORATES
MACQUARIE GROUP LIMITED – ASX MQG, STANDARD AND POOR’S 500 INDEX, UNITED STATES. FEDERAL RESERVE BOARD, MORGAN STANLEY AND COMPANY INCORPORATED, STANDARD AND POOR’S ASX 200 INDEX, TELSTRA CORPORATION LIMITED – ASX TLS, TREASURY WINE ESTATES LIMITED – ASX TWE, BRAMBLES LIMITED – ASX BXB, CSL LIMITED – ASX CSL, BLOOMBERG LP, EUROPEAN CENTRAL BANK

Higher volatility is going to be a fact of life again

Original article by Bill Bovingdon, Chris Dickman
The Australian Financial Review – Page: 23 : 26-Feb-18

Further volatility can be expected across all asset classes as central banks wind back quantitative easing programs and interest rates rise from historic lows. The European Central Bank has begun to scale back its asset purchasing program, although inflation is not yet sufficiently high for it to begin adjusting monetary policy. Meanwhile, Australia’s cash rate is likely to remain steady amid a continuing low level of inflation. The active management strategy is likely to deliver better returns than passive investing in the current environment,

CORPORATES
EUROPEAN CENTRAL BANK, PEOPLE’S BANK OF CHINA, ALTIUS ASSET MANAGEMENT PTY LTD

Share indexes tipped to test recent lows

Original article by David Rogers
The Australian – Page: 27 : 15-Feb-18

Bank of America Merrill Lynch’s Bull & Bear Indicator suggests that global equities face a further pullback and could fall to around the level seen during the recent sharemarket rout. Meanwhile, BAML’s latest survey of fund managers shows that respondents’ average cash balance has risen by 0.3 per cent to 4.7 per cent, while equity allocation has fallen by 12 per cent and bond allocation has fallen to the lowest level in two decades.

CORPORATES
BANK OF AMERICA NA, MERRILL LYNCH AND COMPANY INCORPORATED, MSCI ALL COUNTRY WORLD INDEX, UNITED STATES. FEDERAL RESERVE BOARD, WESTPAC BANKING CORPORATION – ASX WBC

Christmas rally shows no sign of slowdown

Original article by David Rogers
The Australian – Page: 18 : 21-Dec-17

The latest survey of fund managers by Bank of America Merrill Lynch suggests that the global sharemarket rally may continue into 2018. The December survey shows that the average cash balance of respondents has increased from 4.4 per cent to 4.7 per cent, compared with the average over the last decade of 4.5 per cent. The survey also found that 54 per cent of the 203 respondents expect global economic growth to be above trend over the next year, while inflation is expected to be below trend.

CORPORATES
BANK OF AMERICA CORPORATION, MERRILL LYNCH AND COMPANY INCORPORATED, UNITED STATES. FEDERAL RESERVE BOARD, EUROPEAN CENTRAL BANK, FACEBOOK INCORPORATED, APPLE INCORPORATED, AMAZON.COM INCORPORATED, GOOGLE INCORPORATED, ALPHABET INCORPORATED, BAIDU.COM INCORPORATED, ALIBABA.COM CORPORATION, TENCENT HOLDINGS LIMITED, BELL POTTER SECURITIES LIMITED

Fund managers wind back expectations and hoard a little extra cash

Original article by David Rogers
The Australian – Page: 28 : 17-Aug-17

Bank of America Merrill Lynch’s latest survey of fund managers shows that just 33 per cent expect a rise in global corporate profits in the next 12 months, compared with 58 per cent in February 2017. Chief investment strategist ­Michael Hartnett says the survey provides a "warning sign" of the likely performance of shares against bonds, as well as cyclical stocks against defensive stocks. The survey also found that the average cash balance of the 174 respondents is now 4.9 per cent, compared with an average of 4.5 per cent over the last decade.

CORPORATES
BANK OF AMERICA CORPORATION, MERRILL LYNCH AND COMPANY INCORPORATED, STANDARD AND POOR’S 500 INDEX, MSCI WORLD INDEX, STANDARD AND POOR’S ASX 200 INDEX, NASDAQ, UNITED STATES. FEDERAL RESERVE BOARD, EUROPEAN CENTRAL BANK

Global investors moving ASX funds elsewhere

Original article by Myriam Robin
The Australian Financial Review – Page: 31 : 23-Jun-17

Some fund managers suggest that the Australian sharemarket’s 1.6 per cent downturn on 21 June was prompted by foreign investors shifting out of local equities. Meanwhile, Tony Brennan and Mark Tomlins of Citigroup say Asian sharemarkets may be more attractive to international investors at present, given their better prospects for earnings upgrades. Hasan Tevfik of Credit Suisse adds that passive fund managers are likely to reduce their exposure to Australian shares in coming years as the MSCI Asia-Pacific ex-Japan’s weighting toward Chinese and Hong Kong-listed shares increases.

CORPORATES
CITIGROUP PTY LTD, CREDIT SUISSE (AUSTRALIA) LIMITED, MSCI ASIA-PACIFIC EX-JAPAN INDEX, MSCI EMERGING MARKETS INDEX, MSCI INCORPORATED, MACQUARIE GROUP LIMITED – ASX MQG, COMPUTERSHARE LIMITED – ASX CPU, MSCI AUSTRALIA INDEX