CONTRIBUTORS
Reece Birtles
CIO, Martin Currie Australia
PREVIEW
In the six months since our last report, vaccine news, ongoing stimulus, and strong economic indicators have changed the COVID-focused downturn narrative to one of recovery. The February 2021 reporting season has brought in the strongest earnings per share (EPS) revisions we have seen for Australian companies in 10 years.
Digesting the results, and translating these into earnings revisions, the market now expects that we will be back to pre-COVID levels of earnings within the next twelve months.
We are excited by the recovery, and what it means for our portfolios going forward. Based on our top-down analysis, fundamental views from our company engagements, and our big picture work, the future does look more positive, and there are good opportunities for Australian companies to thrive in a post-COVID world, but risks remain from the end of JobKeeper, inflation, zero rates and poor governance.
We would reiterate that it is important to be aware that Value spreads are narrowing as the economy rebounds, and to focus on Value style stocks while avoiding the expensive stocks and parts of the market that will be damaged by inflation.
For income focused investors, dividends from high quality companies will continue to be very compelling relative to other income asset class options available today, especially as worldwide stimulus is building inflationary pressures and steeping the yield curve.
In the full article (PDF), our team of Australian investment specialists, led by Reece Birtles, Martin Currie Australia's Chief Investment Officer, provide:
- A top-down analytical review of the recent company reporting season;
- insight into the key fundamental themes from our engagements with company boards and management;
- analysis of Australia’s economic and market outlook; and
- implications for investors in Australian equities.
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