I’ve been saying it for three years and will keep doing so, put your money in a different country. From Goldies:
ASX 200 down 7% in US$ for the month
The ASX 200 underperformed significantly during November (-7.3% in US$ vs MSCI World +2.9%) as commodity exposures became a drag.
Underperformance was broad based with each of the broad sectors lower: Resources -9%, Defensives -3.2%, Financials -1.9%, Cyclicals -1.7%. Further, every ASX sector lagged their global peers during November. The ASX 200 now trades at 13.9x forward P/E, the bottom end of its 2-year valuation range and a 12% discount to the MSCI World (the largest gap in over a decade). While valuation may look more appealing, the growth outlook does not. I/B/E/S consensus expects ASX 200 EPS growth of just 3% over FY15 and top down we continue to assume downside to this weak outlook.
…Commodity price deflation extending. OPEC’s decision to maintain production saw Oil -18% for the month with the energy sector -13%. STO has been the biggest underperforming in the space, down 35% from its ytd high vs. large cap peers down 20-25%. Iron Ore continued its slide, down 9% for the month to US$70, contributing to an 8% fall in the mining sector. US$ earners extend their run (+1.8% mom, +17% ytd) while value names continue to struggle (-6%). Our ‘Value’ factor is down 23% ytd as premium rated stocks have had a strong year (+17%), while many ‘value’ firms in cyclically challenged industries turned into value traps.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
