A more constructive near-term outlook for China and continued Resource earnings upgrades are helping offset weakness in Industrial earnings. As a result, we see less downside for Australian equities, and lift our ASX 200 PT from 4,800 to 5,200 (12-month PE of 14.5x and EPSg of 5%).
Growth outlook better than feared: While this week’s IMFglobal growth downgrade highlights a still-subdued environment, our Global Economics team notes that incoming data is actually less weak than our forecasts updated mid-July after the UK referendum vote. Indeed, our Morgan Stanley Global Coincident Indicator (MSGCI) points to 3.0% GDP growth in 3Q16,versus our 2.4% forecast.
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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.
