Rudi's View | 10:00 AM
Fresh into the new financial year; a closer look into two of the dominant sectors on the ASX, plus A-REITs.
By Rudi Filapek-Vandyck, Editor
It's early days, but after the tax-loss selling and window-dressing antics in June, it appears the Australian share market is reverting to more normal programming in July.
Expensive defensives no longer look like the natural go-to destination and many stocks that persistently encountered selling pressure in June are visibly springing back to life.
One should refrain from drawing too many conclusions, though. Many share prices had been artificially depressed. Seasonal buyers chasing the upward corrections in July do not automatically signal a more favourable outcome for the weeks and months ahead.
Underneath the surface, the risk of yet another RBA rate hike remains in place, while economic momentum is deteriorating, not least because the always reliable domestic property market is no longer providing solid support, with market updates from Australian businesses more likely to disappoint than otherwise.
Investors might well take guidance from strategists at Morgan Stanley, who predict the upcoming results season in August will likely pull down the average EPS increase to single digits from the 12.9% currently forecast by market consensus.
Morgan Stanley is far from the only one that strongly believes the risk remains to the downside for corporate earnings in Australia. Such a rather large reduction has essentially two major consequences:
- There will be many disappointments before and during August
- Share price volatility is about to spike higher
Within this context, the statistics generated from corporate results delivered post-February look awful, though, granted, they looked worse post-August last year.
Check it out here: https://fnarena.com/index.php/reporting_season/
A-REITs Join The Comeback Trade
As always, it's the amazing comebacks, such as the 60%-plus rally in Pro Medicus ((PME)) shares in a little over one month, that attract most market watchers' attention.
But has anyone noticed the comeback from yesteryear's market laggards equally features strong outperformance from selected A-REITs?
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