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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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These podcasts are for general information purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. They have been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on the information, consider its appropriateness having regard to their or their clients’ individual objectives, financial situation and needs. The information is not to be regarded as a securities recommendation.
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Nov 10
How to read the rally | The signal that will end rate hikes | Lessons from US earnings season
Tim Hext: The case for inflation-linked bonds
With the cost of living rising, are inflation-linked bonds a good option?
Returns from inflation-linked bonds are adjusted for inflation, allowing investors to protect real returns. They’re not popular in Australia, which is something of a mystery to our government bonds chief Tim Hext.
“We expect US inflation will fall soon and Australia will follow by mid-2023. Risk markets may take some encouragement from this, but inflation is likely to remain around 3-4%.
In this environment investors need the defensiveness of bonds, which have restored their insurance credentials after this year’s hits, says Tim.
“My recommendation would be to buy inflation-linked bonds. The mainstream investment community seems to prefer standard, nominal bonds — as evidenced by the nominal-only benchmark proposed for bonds in the Your Future Your Super guidelines.
“In my view this is poor policy, overlooking the benefit that inflation-linked bonds provide for retirees or those near retirement.”
Crispin Murray: What’s driving Aussie equities this week
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Crispin Murray: What’s driving Aussie equities this week
The medium-term outlook for markets depends on the degree of economic downturn and its impact on company earnings.
But there is debate about how much the downturn will affect earnings, says our head of equities Crispin Murray.
“Historically, recessions have led to an average 20 per cent fall in earnings,” says Crispin.
“But this is often in a low-inflation environment, when nominal GDP (a proxy for corporate revenue) is low.
The bulls argue that three factors may mitigate earnings decline, says Crispin:
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Companies will benefit from higher nominal growth, supporting revenue and helping cover fixed costs
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Materials and energy companies will see continued strong earnings, given lack of supply
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The potential re-opening of China may offset weakness in Europe and the US
Nov 3
Three things to watch when re-entering markets | Why bonds look promising for Q2 next year | How China has ‘completely changed’ for investors
Oct 27
Budget, inflation and rates outlook | Xi and the ASX | How to avoid greenwashers | Indonesia looks promising | Euro outlook
Oct 20
The case for currency hedging | A ‘solution’ for stranded assets | A new kind of ESG engagement | EM countries weathering the storm
TIM HEXT: Mixed signals will remain into Christmas
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TIM HEXT: Mixed signals will remain into Christmas
After an extraordinary year, investors are hoping for clear air in 2023.
Will we get it?
Next year is when rate hikes fully kick in and the resilience of the real economy will be tested, says Pendal’s head of government bonds Tim Hext.
“Policy-makers are happy for the pain to continue until they see actual – not anticipated – inflation turns,” says Tim.
“Inflation is a lagging indicator – often by six to 12 months. But central banks view an inflation policy mistake as worse than a recession.
“Waiting for supply to solve the problem is proving too much. Demand destruction is required, even though it means people losing jobs and in some cases forced out of homes.”
That means clear air is unlikely until 2024 when a “normal” economy returns, says Tim.
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