Rudi's View | Aug 08 2024
In today's update:
-First Relief, Then More Selling?
-Conviction Calls and Best Buys
By Rudi Filapek-Vandyck, Editor
When equities sell off because of non-fundamental reasons, the best response is probably not to join the selling but instead to start looking for opportunity.
Monday's excessive pull back in the local stock market might well qualify as such a non-fundamental event as, contrary to the many media reports about US recession angst, the real trigger was the yen carry trade turning nasty.
For those not yet aware of what the yen carry trade entails and why it was the trigger to a global rout in risk assets, the following video explains it nicely: https://x.com/i/status/1820319360793149625
A similar approach stands out from share market strategy updates this week. Great minds thinking alike? Below are some of the more interesting updates I have come across.
UBS strategist Richard Schellbach sticks to his year-end target for the ASX200 of 8000.
He sums up today's fundamental proposition as follows:
-Worried about US jobs data (and thus recession)?
UBS remains fairly confident in an overall positive outcome. Locally, the RBA will remain on hold for longer, and this is partially because economic growth is holding up better-than-anticipated.
UBS thinks the local market will continue to move higher as the Fed cuts in the US. The RBA is expected to start loosening in May next year.
-Worried about overvalued Tech and Gen.Ai beneficiaries?
UBS argues any follow-through impact from a sell-off in US technology stocks will remain fairly limited for Australia.
-Worried about further carry trade unwinding?
UBS argues once the Fed starts cutting interest rates, the US dollar should start weakening. Historically, this always has been beneficial for the Australian share market.
-Worried about China's slowdown?
Okay, UBS admits it, this remains a genuine worry. Thus far, resources stocks have lagged the broader market, but UBS also points out the picture painted by local miners hasn't been that pessimistic.
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Bell Potter has been equally confident about weaker share prices opening up great opportunities. Having run its ruler over the ASX100, the following oversold screen results were communicated with the broker's clients on Wednesday morning:
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