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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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Tim Hext: Australia’s in a surprisingly good position to weather the global storm
Investors could not be blamed for feeling a bit queasy at Donald Trump’s whipsaw approach to tariffs.
“The tariff threat does add to this argument that inflation isn’t about to come down anytime soon,” says Pendal’s head of bonds strategies Tim Hext in our latest Fast Podcast.
“The market is right to be a little bit concerned. Obviously free trade – or some version of free trade generally benefits both parties.
“The law of comparative advantage says you end up focusing on what you are a cheap producer of. If you start to throw sand into the gears of free trade that’s not a good thing.
“Ultimately, I think it is bad for growth and will mean slightly higher inflation, but not enough to suddenly cause rate hikes in the near future.”
“It creates a lot of short-term noise, but fortunately investors with a medium-to-long-term time-frame can leave it to people like me to worry about that.”
Tim says investors should hold course for now.
Pendal profile: Meet our head of government bond strategies, Tim Hext
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Pendal profile: Meet our head of government bond strategies, Tim Hext
Investors could not be blamed for feeling a bit queasy at Donald Trump’s whipsaw approach to tariffs.
“The tariff threat does add to this argument that inflation isn’t about to come down anytime soon,” says Pendal’s head of bonds strategies Tim Hext in our latest Fast Podcast.
“The market is right to be a little bit concerned. Obviously free trade – or some version of free trade generally benefits both parties.
“The law of comparative advantage says you end up focusing on what you are a cheap producer of. If you start to throw sand into the gears of free trade that’s not a good thing.
“Ultimately, I think it is bad for growth and will mean slightly higher inflation, but not enough to suddenly cause rate hikes in the near future.”
“It creates a lot of short-term noise, but fortunately investors with a medium-to-long-term time-frame can leave it to people like me to worry about that.”
Tim says investors should hold course for now.
Pendal profile: Meet our head of credit and sustainable strategies George Bishay
Play podcastPendal profile: Meet our head of credit and sustainable strategies George Bishay
Services – particularly wages and rental inflation – have held up prices recently. But Pendal’s forward indicators show the drivers of these two factors weakening.
That means inflation in developed markets should continue to fall and central banks globally can start cutting rates, says Pendal’s head of credit George Bishay.
It’s a bullish scenario for bonds as well as credit and equity markets, he says.
But one of the risks for that scenario is a Donald Trump victory in November.
“If Trump wins the election, will he have the ability to change policy? Will he have a majority in both houses of Congress?
“If he does, that’s problematic for bonds because ultimately that’s likely to be inflationary,” says George.
The impact of a Trump presidency is more skewed towards longer-term bonds because his policies would likely have a medium-term impact on inflation, George says.
“The short end should continue to perform because central banks will be easing rates as current inflation comes down.”
Amy Xie Patrick: Turbulent conditions require a decisive, active approach to fixed income
Play podcastAmy Xie Patrick: Turbulent conditions require a decisive, active approach to fixed income
Fixed-income investors looking for lower yields – and therefore higher prices on their bond investments – may be disappointed with the recent cycle.
“When I’ve been speaking to clients over the past few weeks, many have been worried that the cutting cycle is not translating to lower bond yields in the same way we’ve seen previously,” notes Pendal’s Amy Xie Patrick in her latest fast podcast.
But investors need not be concerned, since conditions still favour a rate-cutting environment, says Amy, who leads Pendal’s fixed-income strategies.
Underlying inflation is under control – supported by a looser US labour market which has not yet been impacted by President Trump’s mooted immigration crack-down. n Australia a tighter labour market has not led to significant wage increases.
“The market’s priced in two more US cuts this year, maybe another two in Australia.
“The RBA has enough room to get back to neutral fairly quickly… And the Federal Reserve probably has the ability to move a little bit more than the market’s priced in.
“It’s still a choppy year ahead – but this is where a proven active process for duration and rates really does count for fixed-income portfolios.”
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