Australia Strategy: Catalyst Inquirer
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 28 April 2016, 11:21 AM
- Sectors Covered:
- Equity Strategy and Quant
Market volatility is normal
Equity markets remain at the mercy of abnormal macro-economic conditions. Making
bold portfolio decisions amid such uncertain conditions is a difficult, and potentially
hazardous, exercise, and hence our cautious Asset Allocation settings.
We think choppy
markets will persist through 2016 but we’re comforted by the fact that the volatility is
normal and simply reflects the price investors pay for the long-term outperformance of
Positioning ahead of stock-specific catalysts
Despite the difficult backdrop, the market is still rewarding investors positioned in
companies exposed to compelling themes (refer to: Key market themes for 2016. N.B. Client access only).
look ahead to several catalysts in May-June which we think will generate share price
strength among many of our favoured exposures including Telstra, Challenger, Next
DC and IPH. Access further details on these stocks in my full report (client access only).
Telstra is an interesting large cap addition to our list this
month ahead of further potential capital management. Equally, in this unforgiving
market, we nominate some key events to avoid to minimise the risk of short-term capital
loss in names including Orica and Incitec Pivot.
Other market events to watch
- The banks' reporting season kicks off in early May with Westpac (May 2), followed
by ANZ (May 3), NAB (May 5), and Macquarie (May 6). We expect intense scrutiny on
bad debts, margins and dividend guidance.
- Chief Economist Michael Knox expects
one to two more cuts in domestic interest rates, with one cut potentially before June,
which is likely to rebuild equity support for high yield plays
- The federal budget will
be handed down early on May 3. Company and/or personal income tax cuts are
potentially on the table although we doubt the market will price these in given the fickle
state of affairs in Canberra. Budgets are traditionally a risky time for healthcare stocks
and despite the sector having already been smacked in 2016, we will conservatively
await the outcome of the budget and the MBS review.
- Finally, we address the risks
around the UK’s 'Brexit' referendum in our recent note Budgets & Brexits published
April 19 (client access only).
View the full list of potentially positive and negative upcoming stock catalysts by viewing the full Catalyst Inquirer report. If you would like more information, please contact your Morgans adviser or nearest Morgans office.
Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.
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