by Chris Becker
Amid a significant correction in bank and other stocks, including stalwarts like Woolworths (WOW), its easy to be bearish overall on the ASX200. What’s harder is countering those claims given the headwinds facing the economy and the currency.
Deutsche Bank has a report out today that puts Australia equal second last on its list of Asian stocks to invest in.
Here are the money quotes:
Australia’s most obvious challenge is a complete lack of earnings growth. In fact, earnings are forecast to fall in both FY15 and FY16.
It is also unpopular with analysts compared to the region, which isn’t a good thing.
Its rightly unpopular because a lack of underlying earnings growth, even as miners up volumes and the banks explode their specualtive mortgage core businesses shows clearly the thin wedge that the structurally unsound economy sits on. There are some upsides:
The market still offers a compelling yield (~5%, the highest of any major market), so will be of interest to income investors. And given its large size, there should be interest in selected sectors and stocks.
DB likes the housing sector, although I would contend thats a short to medium term play at best. Another interesting chart within the report is the foreign investment exposure to the ASX200 – now running well over 40%, but starting to taper as the USD adjusted returns start to bite as the correction runs on the currency as well.
