I appeared on Channel News Asia again this morning at 6:20am SGT, via Skype. My questions and my responses in the form of brief notes are below:
Q1. Global equities are poised for the worst quarter since 2011. Will the fourth quarter be any better?
You would certainly think so. You only have to go back to August to when China’s markets sent the global equities sharply lower as concerns about the stability of their financial markets was severely questioned. This created a surge in volatility and sent markets lower all within 1 week, there this decline was isolated. Since that time, most global indices have stabilized and consolidated quite well and held off from any further declines.
Q2. Where will the Australian market heads today after climbing 1.4% yesterday?
The ASX200 continues to tread carefully around the key 5000 level. As much as the ASX200 index has been relying upon the key 5000 level for support, the index recently fell to its lowest close in over two years, however it continues to receive solid support and demand around this level.
We have received a very strong negative lead from U.S. stocks overnight so it is highly likely this will impact the ASX opening, and also throughout Asia this morning. This will be the initial move and it will be interesting to see whether this is sustained through the day or whether the 5000 level can prop it up again.
Q3. The Big Four banks have fallen an average of 25% from their closing highs of about six months ago. Are valuations looking attractive?
I think it all depends on how you view value. The Big Four banks consistently make multi-billion dollar profits and are well established, fundamentally sound companies so if you are not overly concerned with purchasing stocks at low prices, then they definitely represent good value and attractive.
Others consider stock purchases using price trends and the fact that prices have declined so strongly provides little incentive to buy in as prices may continue to decline.
Q4. What’s their (banks) growth outlook as the wider economy cools?
As I just mentioned, the Big Four banks never struggle to report their multi-billion dollar profits. They have made changes however in the last 5 years which has seen them adapt to the changing financial landscape. We now see banks move independently of the RBA in determining interest rates that they charge to customers.
They have their own internal review of interest rates and have shown their willingness to move even though the RBA hasn’t changed the official cash rate. This has allowed them to adapt and continue to generate strong revenue.
Q5. The Australian dollar continues to trade above 70 US cents. Does the Aussie remain elevated?
Over the last week or so the Australian dollar has fallen away from the key resistance level at 72 cents which has seen it revisit the more significant 70 cents level. It has now spent the last few days trading around this level as it provides a measure of support, but it is also being closely watched to see what unfolds from here.
There is a feeling that there remains bearish sentiment surrounding the Australian dollar which is likely to see it drift further.