From The Australian:
Deutsche Bank’s Aussie equity strategist Tim Baker says it is “not a good start” to reporting season.
With some 30 per cent of companies having reported – or 45 per cent by market cap “the picture isn’t great so far,” Baker says.
He says the ratio of beating forecasts to falling short for the June half is around 52 per cent (in-line with the 4-year average), “but the changes to forecasts are concerning”.
He notes that Deutsche’s analysts have cut profit forecasts for 66 per cent of companies, compared to the 4-year average of 57 per cent.
Notably, fiscal 2016 forecasts for industrial companies that have reported has been cut by 2-3 per cent he add.
“The market seems to agree that results have been tough”, reflected in Australian market underperforming global peers by 6 per cent in August.
Baker has been the most bullish analyst I know, selling a thesis that US-style cost cutting and productivity gains would boost profits. Sadly, however, there are no productivity gains to drive income growth and national income is under external assault from commodity price collapses as well, which puts pressure on most domestically focused business. The following chart from Gerard Minack says it all:
It’s no wonder the Australian share market is delivering such terrible returns versus other developed markets:
This is the stuff of a lost decade.
