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The Point
Quick, actionable insights for investors
May 29
The headlines driving Aussie equities | Falling USD should lift EMs | Where to find opportunities in theme-driven markets
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Elise McKay: The headlines driving Aussie equities this week
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Elise McKay: The headlines driving Aussie equities this week
Here are the main factors driving the ASX this week, according to Aussie equities analyst and portfolio manager ELISE MCKAY and reported by head investment specialist CHRIS ADAMS
Read Pendal’s latest weekly equities overview.
Crispin Murray: Where to find ASX opportunities amid ‘theme-driven’ market noise
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Crispin Murray: Where to find ASX opportunities amid ‘theme-driven’ market noise
Share prices are increasingly moved by popular themes like AI disruption, trade wars, and tariff fears – without regard to company fundamentals or long-term valuations.
As a result, quality Australian companies with sound outlooks and predictable cash flows are being indiscriminately sold off.
That’s creating opportunities for active fund managers, Pendal’s head of equities Crispin Murray told Morningstar’s 2025 investment conference in Sydney last week.
“We believe this is creating more distortions in the market. It means the amplitude of mispricing is greater, and it lasts longer.”
Global market dislocation means the ASX has a range of industrial companies with predictable cash flows and returns that have been sold down and offer opportunities for investors, he says.
“One example is CSL – one of Australia’s largest, most successful companies. Five years ago it was running high – at an over-40 multiple. It’s now down to about 22 times earnings,” he says.
Fears of the impact of tariffs on CSL are misplaced, assuming the company doesn’t do anything to respond – “and I think that’s where the market’s overreacting,” argues Crispin.
“We think the risk on the tariff front is being overstated, and that’s what’s providing you the opportunity.” Pendal owns CSL.
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‘Emerging markets crisis’? That’s a wildly overstated view, say our experts
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‘Emerging markets crisis’? That’s a wildly overstated view, say our experts
Some analysts have described a pattern of a weaker dollar and rising bond yields in the US as a ‘classic emerging markets crisis’.
“As veterans of actual emerging crises dating back to 1994, we consider that view to be wildly overstated,” writes Pendal’s EM team in their latest analysis.
In spite of volatility and weakness in core US financial markets, the currencies of almost all emerging markets strengthened against the US dollar in March and April. Meanwhile bond yields fell for the majority of major EMs.
“Emerging markets are driven by two major global drivers: international capital flows and international trade.
“A weaker dollar represents capital flowing out of the US and into the rest of the world – and a weaker dollar has consistently been positive for emerging markets over the past 30 years.
“Although evolving tariff policies threaten a downturn in global trade, the message from financial markets is that investor uncertainty about US economic policies is a clear positive for emerging economies and for investors in emerging markets.”
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Amy Xie Patrick: China, the US, and the value of uncertainty
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Amy Xie Patrick: China, the US, and the value of uncertainty
This month’s divergence in US and China rates policies wasn’t just a curiosity for money managers, observes Pendal’s head of income strategies, Amy Xie Patrick.
“It’s a study in contrasts, a reflection of deeper structural differences, and a reminder that policy effectiveness doesn’t always come wrapped in transparency or even democracy,” says Amy in her latest markets analysis.
On May 7, the US Fed left rates unchanged despite growing political pressure. Meanwhile, the People’s Bank of China delivered another dose of stimulus.
“One central bank faced market criticism over its non-committal guidance,” notes Amy. “The other moved swiftly and silently, without needing to justify its decision.
“Perhaps the most contrarian yet valuable takeaway is that less policy guidance may be a good thing.
“By avoiding the hard task of forecasting far into the future, we free ourselves from unhelpful narratives may that turn out to be false.
“By focusing on getting it right rather than always being right, we’re able to preserve the flexibility to change course when the fundamentals change.”
Read Amy’s full article here
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Private debt vs. public bonds: why it’s time to re-examine the traditional role of fixed income
Private credit has its place in portfolios.
So do bonds.
As rates normalise, investors would do well to remember those roles are different, writes Pendal head of income strategies Amy Xie Patrick.
AMY XIE PATRICK: How to manage fixed income portfolios in this environment
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AMY XIE PATRICK: How to manage fixed income portfolios in this environment
This week Pendal’s head of income Amy Xie Patrick sat down with head of client solutions Dale Pereira to answer some common investor questions.
A common query is: when rates are higher, why not leave my money in a term deposit?
“For some investors, term-deposit returns on cash are enough,” says Amy. “They’re more than happy to take those returns after years of really slim pickings in this area.
“But the biggest frustration for many investors who chose term deposits over fixed income last year was missing out on the upside. Both bonds and equities outperformed term deposits in 2023.
“This year, locking in 5% term deposits might sound nice at first.
“But you would also be locking up your capital for a year.
“It makes it harder to move your money around when things change, which means you can’t deploy it quickly or easily to buy the dip if we get a decent correction in markets.”
Mar 7
Lessons from the latest GDP data | How to invest in troubled times | AI opportunities outside the Magnificent Seven
Aussie equities: How Xero and NEXTDC are leveraging AI technology
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Aussie equities: How Xero and NEXTDC are leveraging AI technology
On a tour of the US late last year, Pendal equities analyst Elise McKay met with dozens of companies – and found generative AI was a topic in almost every meeting.
“There’s strong evidence that over the longer-term generative AI will have a big impact across the business landscape,” McKay said at the time.
Six months later, investors are still entranced by the US “Magnificent Seven” tech stocks.
But several ASX-listed companies are making solid progress in leveraging the technology, points out Elise. These include cloud-based finance software maker Xero and data centre manager NextDC – both held by Pendal.
In her latest update, Elise outlines XRO’s “Just Ask Xero” AI assistant and NXT’s Nvidia-based “AI factory” which is expected to launch in coming months.
Elise also addresses one of the big issues that continues to face the AI industry – access to power.
The industry is working on solutions including better computing efficiency, improved cooling technologies and alternative power sources.
Tim Hext: What we learned from the latest GDP data
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Tim Hext: What we learned from the latest GDP data
The December-quarter GDP numbers stopped just short of the “no-growth” scenario we were slowly sliding towards last year at 0.2%.
What were the takeaways for markets?
“First of all, rate hikes have worked,” says Pendal’s head of bonds Tim Hext.
“While the fixed-rate cliff has been more of a speed bump, the RBA will be pleased that higher rates are reducing demand.
“Lower immigration in the year ahead will also help. The supply side of the economy has largely normalised.
“This will give the RBA further comfort that the path back below 3% inflation is achievable.
“This opens the door to rate cuts later in the year. We think three cuts – September, November and December.
“By then the US Fed should be well into rate cuts. Inflation – while sticky around 3 per cent – would be considered under control.
“GDP would be allowed to push back up towards 2% or above without threatening the inflation outlook.
“This would be a good outcome for all and meet the objectives of the RBA.”
Amy Xie Patrick: Outlook from the bond enthusiast
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Amy Xie Patrick: Outlook from the bond enthusiast
What are the main factors impacting income strategies right now?
Pendal’s head of income strategies Amy Xie Patrick has just published a deep dive on how her view has evolved in recent months.
Among Amy’s main observations:
- Consumer resilience has been surprising and may be explained by a rise in real incomes as inflation cools
- This limits the ability of bonds to keep rallying since central banks may be fearful of reigniting a new wave of inflation
- As markets entertain the idea of “no landing”, there could be heightened market volatility and bouts of “everything sell-offs”
- If growth remains resilient these bouts should be short-lived and present opportunities for active portfolios.
- A hard landing isn’t off the table, but it’s too soon to position for it just yet
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