Australia | Sep 05 2014
By Mathan Somasundaram, Baillieu Holst Quant Strategy
Summary: Aussie market remained negative with falling Iron Ore and US market sentiment post ECB move. We continue to be negative in the short term as the markets have run too far ahead of valuation, rising geopolitical risks, China tightening, stocks going ex div, escrow shares taking marginal buying and ECB delivering nothing new for now.
Iraq looks certain to see substantial war…against who is the question being worked out. Putin continues play games with EU by shadow ceasefire to delay any NATO move. Super Mario once again delivered a lot of talking and promises but not a lot of detail. QE in Europe is not as simple as in US or Japan…each country has to drive growth through their austerity and defensive governments. RBA was conflicted as it was not willing to talk down the housing sector…the only sector driving growth besides mining. Another day where politicians ran around blaming each other while being pre-occupied with slogans and score cards.
Today was all about how many promises the government kept and how many broken…not sure about the counting between Fairfax and News Corp, but there is a lot more broken promises than the last government. The more things change, the more they stay the same. We can only hope that the politicians on all sides can get their act together and show some leadership…but let’s be realistic….too may vested interests and ideology in all sides to get anything done. Index change announcements today moved a lot of small caps around…just to add to the Friday mess. If the US non-farm payroll data comes out weak, we may see some red around the world to start next week.
Trading idea of the day: Breville (BRG) – Breville engages in the development, marketing and distribution of small electrical kitchen appliances to the consumer products industry, with the main brand called Breville. BRG has a product development centre in Sydney, as well as a quality assurance centre in Hong Kong. Its products are sold to a number of markets, with principal markets being Australia, North America, New Zealand, and Hong Kong. We turned positive after it was sold down to $7.10 after the result and announcement of management change. BRG is a quality global growth retailer with PMV increasing their holding from below 25% to over 27% on the recent sell off. We expect BRG to trade back to $8.60 in the next 12mth as the market chases global growth stocks with US/Euro exposure and falling currency. We added BRG to the Quant Strategy Portfolio last month after the pullback.
Market Move: Aussie market was down 0.58% with turnover was just above $4.0b.
Macro Events: Tonight – US non-farm payrolls; UK BoE inflation forecast; Germany industrial production.
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