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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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Nov 16
The trend of the year | Bull and bear cases | Asset allocation for the ‘old normal’ | Value in value investing | What’s unique about Aussie bonds
Moderating inflation is the trend of the year. Here’s what it means for investors
Moderating inflation is now the trend of the year, says Anna Hong, an assistant PM with Pendal’s income and fixed interest team.
The US CPI increased 3.2% in the year to October – down from 3.7% annualised in September.
While Australia remains higher (we’re probably six months behind the US says Anna), we can see light at the end of the tunnel.
“Across the globe, economies have been seeing inflation come down as the resumption of supply chains eased price pressure on goods.
“This time around the inflation slowdown was much more broad-based, rather than just a goods-fuelled moderation.”
With moderating inflation as the trend of the year, investors can be more assured in their bond allocation, Anna argues.
“On balance, we believe Australian bonds should provide better risk-reward ahead.”
Crispin Murray: What’s driving Aussie equities this week
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Crispin Murray: What’s driving Aussie equities this week
There are two views on the medium-term outlook, says Pendal’s head of equities Crispin Murray.
The bears expect material weakening or recession in the US next year due partly to the lagging effect of monetary tightening on longer debt duration.
Unemployment might rise materially, affecting consumption and bringing forward rate cuts. Corporate earnings could fall and equity markets de-rate.
The bulls believe the peak in financial conditions tightening has passed and now presents a lighter headwind.
In this scenario, core inflation falls quickly, unemployment stays low and GDP growth resilient, reflecting a cycle distorted by the pandemic. Wages would ease off while consumption remained supported.
Falling inflation could prompt rate cuts, providing protection against a slowdown.
Nov 9
Opportunities emerge in China | How rates are impacting private credit | Promising mid-cap themes | Rate pause expected
Aussie equities: AI and cloud computing drive data centre stocks
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Aussie equities: AI and cloud computing drive data centre stocks
Elsewhere in this newsletter, Pendal PM Brenton Saunders nominates data centre stocks as one of three thematic opportunities in the mid-caps space.
Pendal analyst Elise McKay agrees, having just returned from a US trip where she met with participants across the data supply chain.
Elise believes established data centre (DC) owners with existing capacity are best-placed to benefit from growing demand due to the time it takes to acquire land, undertake construction and manage power requirements and other complexities.
“I’m very bullish on the outlook for data centres,” Elise says.
The accelerating shift to the cloud is driving demand. Global demand is forecast to triple in the next five years, according to research from Cushman & Wakefield. Generative AI is adding to that shift.
“There’s strengthening demand for DCs and supply is tightening,” Elise explains.
In some major DC locations, such as Northern Virgina in the US, vacancy rates are at one per cent. In Australia it’s closer to 17 per cent.
Emerging markets: Where to hunt for opportunities in China
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Emerging markets: Where to hunt for opportunities in China
Parts of China’s equity market are showing opportunities at current price levels, says emerging markets portfolio manager James Syme.
James believes the EM equities asset class is dominated by bottom-up investors who, in the aggregate, alternatively underreact and then overreact to top-down developments.
“Sometimes over-reaction can occur to the downside, when groups of stocks within markets sell-off indiscriminately to unjustified levels on top-down concerns.
“We believe that’s happening in parts of the Chinese equity market – and that real opportunities are being presented at these price levels.”
Does that mean Chinese equities are set to outperform the broader emerging market benchmark?
No, he says. “The property sector continues to struggle and the loss of market share in US imports will not easily be regained.”
But there are opportunities, James believes.
Nov 2
Investing in a higher-rates world | Time to consider bonds | AI’s not done yet | Watch-out on capital-intensive stocks
Aussie equities: Why you should be scrutinising capital-intensive stocks
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Aussie equities: Why you should be scrutinising capital-intensive stocks
Equities investors have rightly kept a close eye on rising operating costs during the recent period of high inflation.
Now it’s time to pay greater attention to capital expenditure inflation, says Anthony Moran, an analyst with Pendal’s Aussie equities team.
“Any company with a fair bit of capital intensity will be exposed to price rises in coming periods,” argues Anthony.
“If you’re a capital-intensive company, capex inflation is going to erode returns, especially if you don’t have pricing power,” he explains.
“If you’re in an industry where there are just a few manufacturers and they all have the same cost base, maybe they can pass through the higher costs.
“But if it’s an industry like steel, which is a globally traded commodity, there is no pricing power.”
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