Diese Präsentation wurde erfolgreich gemeldet.
Die SlideShare-Präsentation wird heruntergeladen. ×

Baillieu Holst Post Election Seminar July 2016

Anzeige
Anzeige
Anzeige
Anzeige
Anzeige
Anzeige
Anzeige
Anzeige
Anzeige
Anzeige
Anzeige
Anzeige
Wird geladen in …3
×

Hier ansehen

1 von 56 Anzeige

Baillieu Holst Post Election Seminar July 2016

Herunterladen, um offline zu lesen

The Australian Election has delivered more uncertainty rather than less. Darryl Gobbett Chief Economist for Baillieu Holst looks at what that means for the economic landscape and in turn your investments and superannuation.

The Australian Election has delivered more uncertainty rather than less. Darryl Gobbett Chief Economist for Baillieu Holst looks at what that means for the economic landscape and in turn your investments and superannuation.

Anzeige
Anzeige

Weitere Verwandte Inhalte

Diashows für Sie (16)

Andere mochten auch (18)

Anzeige

Ähnlich wie Baillieu Holst Post Election Seminar July 2016 (20)

Anzeige

Aktuellste (20)

Baillieu Holst Post Election Seminar July 2016

  1. 1. Baillieu Holst Post Election Seminar Thursday 21st July 2016
  2. 2. Helen Dundon Baillieu Holst Financial Adviser Welcome
  3. 3. Please read the disclaimer at the beginning of this report. Disclaimer Baillieu Holst Ltd has prepared this presentation for the general information for investors. As no account has been taken of the investment objectives, financial situation and needs of any particular person, it does not represent advice specific to any particular person. Investors must decide whether information contained in this document or any recommendations whether express or implied is appropriate in light of their specific investment objectives, financial situation and needs. Investors should consider seeking professional investment advice from a licensed adviser before making an investment decision. Baillieu Holst Ltd makes no warranty as to the accuracy, reliability or completeness of any information contained herein. Except to the extent that any liability under any law cannot be excluded, no liability for any loss or damage which may be suffered by any person, directly or indirectly through relying upon any information or statement in this presentation or any of its attachments is accepted by Baillieu Holst Ltd, its directors employees or agents whether that loss or damage is caused by any fault or negligence on their part or otherwise. This document should not be substituted for legal advice and is provide for information purposes only. Baillieu Holst does not give taxation advice or legal advice
  4. 4. Please read the disclaimer at the beginning of this report. Todays Proceedings • Introduction to Baillieu Holst – Gavin Powell • Economic overview – Darryl Gobbett • Market update – Ben Prisk • Summary & questions – Helen Dundon
  5. 5. Gavin Powell Baillieu Holst Managing Director Introduction
  6. 6. Please read the disclaimer at the beginning of this report. Baillieu Holst is committed to providing you with a full range of investment advice, financial planning and superannuation services of superior quality and value. We offer integrated wealth management solutions tailored to meet unique wealth creation, protection and management needs. With over 190 staff in seven locations throughout Australia our private client network consists of more than 100 advisers and assistants, servicing clients with funds under advice in excess of $15 billion. Our strategic alliance with Credit Suisse provides you with access to global investment markets and research. About Baillieu Holst Melbourne Bendigo Geelong Sydney Newcastle Perth Adelaide
  7. 7. Please read the disclaimer at the beginning of this report. Our People Alex Hay Director of Institutional Sales Alex has worked at Baillieu Holst since 1993. He first worked in the research department and since 1995 has advised both retail and institutional clients. During this time Alex has also served as acting head of the Retail and Institutional divisions. Stephen Macaw Co-Head of Corporate Finance Stephen has more than 19 years’ experience in stockbroking and investment banking, and has been involved in a broad range of transactions during his career. He is responsible for providing a comprehensive range of services including equity raisings, debt raisings, underwriting new public listings, mergers and acquisitions, and institutional placements. David Trude Chairman David is a senior corporate banking executive with 40 years’ experience in a variety of financial service roles within the banking and securities industries. David has worked with national and international banks across a diverse range of sectors, managing operations and delivering large-scale, complex financing programs, business development and acquisitions in global operations. Gavin Powell Managing Director Gavin has worked for Baillieu Holst since 1994, first as a financial controller/company secretary before becoming the managing director/chief executive officer in 2000. Prior to joining Baillieu, Gavin worked in the audit division at Ernst & Young for 10 years. Walter De Gregorio Director / CFO / Co. Secretary Walter has over 20 years of experience in the stockbroking and the financial services industry. He has held a senior management role at Baillieu Holst for over 10 years covering financial reporting, operational, compliance and risk management responsibilities. Walter started his career at Bell Potter where he worked for six and half years. He subsequently worked at two other firms before joining Baillieu Holst. Nicolas Burgess Head of Research Nicolas joined Baillieu Holst in September 2012 having been an equity analyst since 2003. He has previously worked at ABN AMRO as an insurance sector analyst before joining the Small and Mid Cap team to cover a wide variety of industrial stocks. Nicolas also spent a couple of years in London as the European Diversified Financials Analyst for RBS Equities.
  8. 8. Please read the disclaimer at the beginning of this report. Baillieu Holst - Adelaide Office Mike James Alex ButlerMatthew Loveder Darryl Gobbett Helen Dundon Ben Prisk Alan HutchinsonTravis Adams
  9. 9. Please read the disclaimer at the beginning of this report. Baillieu Holst - Adelaide Office
  10. 10. Darryl Gobbett Baillieu Holst Chief Economist Economic Update
  11. 11. Please read the disclaimer at the beginning of this report. What do the changes to Superannuation mean for you? • $1.6 million superannuation transfer balance cap for Pensions. Likely to proceed. – Each of you would have this limit individually. Remaining Pension Balance can then grow past this. – No indication how this will work for multiple or reversionary Pensions, Defined Benefit Pensions, Disability funds etc – Roll back “excess” benefit to Accumulation mode with income taxed at 15% or 10%, Drawings to be tax free if over 60. – Flexibility of Self Managed super funds compared to Retail or Wrap pension accounts – Retain individual assets and Asset Allocation while shifting the benefits • $500k lifetime Non-Concessional Contribution cap from 3 May 2016. Likely to Proceed. – Small business concession caps appear not to be affected – Backdating to 2007 of Cap already appears unworkable
  12. 12. Please read the disclaimer at the beginning of this report. What do the changes to Superannuation mean for you? • Lowering of Concessional Cap to $25k from 1 July 2017; Bring Forward Rule for Unused Concessional Contributions; Removal of Work Test and 10% Employee income test for contributions up to 75th birthday; Spouse Contributions now to 75th birthday. Likely to proceed. – Limits the amount contributable to super but expands the possibilities – Claim deductions for non-work income and realised capital gains to 75 whether an employee or self employed or neither – Income threshold increased to $37,000 for recipients of Spouse Contributions ($540 tax rebate), now to age 75 • TRIS to lose exempt current pension income status deduction inside Fund from 1/7/2017. Likely to proceed – Pension income received when over 60 still tax free to you. Keep TRIS and pay 15%/10% on fund earnings? – If 60 to 64, retire and start a full pension. If 65 start the full pension. • Industry consultation, preparation of legislation and Parliamentary argy bargy suggest changes and delays
  13. 13. Please read the disclaimer at the beginning of this report. The Federal Election, Brexit and What Else is Going On: What it means for Investors • Political uncertainty likely to be with us for foreseeable future – Voting patterns becoming more volatile, coming and going of minor parties • Outcomes of Western societies’ evident distrust of political, financial and business elites – Seen in rise of Mr Trump, European right wing parties, UK exit vote and Australian election results • Many feel left out of economic liberalisation and Post GFC policies • Feel elites have done very well out of policies that have damaged them and their families • Fear of change and “new” economy • Many people now seeking simple answers from populist leaders to complex problems • Facing possible reversal of reforms that have driven economic growth globally since WW2 – Opening up of markets, lower regulation, freedom of people movement, public deficit reductions, tax reform etc – LNP and ALP have no appetite for reform, Minor parties are anti-reform – Bias will be to increased spending and higher taxes • 2016/17 Budget revenue forecasts are fanciful • Age of Entitlement back with a vengeance with all parties before election • Made worse by fragmented election result, jockeying for next election • Fundamental tax reform is at least 3 - 4 elections away – Major parties do not see current tax regime as an issue • Likely cut in Federal Government global credit rating
  14. 14. Please read the disclaimer at the beginning of this report. • Output and profit growth to be slower due to increased business uncertainty – UK exit from EU to cut UK and European growth • Likely little direct negative impact on Australian trade overall • Could see trade benefits for Australia longer term – Australia, USA and Asia will continue to be the centres of growth – Most economies growing well below potential • Inflation and Interest rates to be lower for longer – Economic, political and security uncertainties – Energy and most commodities still well supplied – Increasing overcapacity in China manufacturing and India now reducing regulation – RBA to cut the cash rate again in 2017 • Hunt for income even stronger as uncertainties pushed interest rates to new record lows – Property, Fixed Interest and Equities – For Equities, resulting in • Rising Price to Earnings multiples and High Dividend Payout ratios • Earnings per Share driven mainly by increased efficiency, cost cutting – rather than revenue gains • Sector returns likely to be more divergent • Portfolios and Strategies need to be worked harder The Federal Election, Brexit and What Else is Going On: What it means for Investors
  15. 15. Please read the disclaimer at the beginning of this report. Why Productivity growth is important: Living Standards and Profits to 2000 driven by recovery in labour productivity growth Rising Commodity prices drove gains 2000 to 2013, but unlikely to repeat Since 2011 real per capita income has been falling. Consider impacts on: • Living standards while working, tax revenue, public spending • Business profitability, Dividend and Share price growth • Investment returns Source: Reserve Bank of Australia May 2016 Statement on Monetary Policy
  16. 16. Please read the disclaimer at the beginning of this report. Economic and Financial Background: Low Growth, Slower Productivity gains, Private Sector deflation Output Growth, Inflation Adjusted, % pa (Red = downward revision Green = upward revision) Cons Price Inflation % pa Interest Rates % pa 19 July 2016 Structural Central Govt Budget % of GDP 1997 - 2006 2014 2015E 2016 F 2017 F 2017F 3 mo Interbank 10 year Govt Bonds 2017F United States 3.3 +2.4 +2.4 +2.2 +2.5 +1.5 0.5 1.55 -3.4 Japan 0.9 0.0 +0.5 +0.3 +0.1 +1.2 -0.10 -0.23 -3.5 Euro Area 2.3 +0.9 +1.6 +1.6 +1.4 +1.1 -0.22 -0.03 (Germany) -0.9 United Kingdom 3.1 +2.9 +2.2 +1.7 +1.3 +1.9 0.5 0.80 -2.2 China 9.4 +7.3 +6.9 +6.6 +6.2 +2.0 4.35 2.84 -2.6 India 6.6 +7.2 +7.3 +7.4 +7.4 +5.3 6.75 7.28 -6.6 Indonesia 2.5 +5.0 +4.8 +4.9 +5.3 +4.5 6.50 7.12 -2.8 ASEAN 5 na +4.6 +4.7 +4.8 +5.1 +3.8 na na na Brazil 2.7 +0.1 -3.8 -3.3 +0.5 +6.5 14.25 11.89 -7.0 Russia 5.0 +0.6 -3.7 -1.2 +1.0 +6.5 10.50 8.50 -3.0 Australia 3.6 +2.6 +2.5 +2.5 +2.5 +2.4 1.75 1.92 -0.9 World +3.4 +3.1 +3.1 +3.4 Group of 7, 1.7 New & Emerging, 5.9 Source: IMF World Economic Outlook, April 2016 and WEO Update, July 2016 ; www.tradingeconomics.com
  17. 17. * Birinyi and Associates, Wall Street Journal Market Data Centre, 19/7/2016 US Corporate Profits starting to lift again but Share Prices up on lower interest rates • US Company Profits down through 2015 • Energy sector and Non-bank financials main losers • Analysts f’cast Earnings per Share lifting in 2016 – Continued Low Interest rates, Cheap Energy • Productivity growing, Wages growth still slow • US consumer outlook improving • Share Prices up again on very low interest rates • For S&P500 companies, Forward Price to Earnings Ratio now 18.4* vs 16.4 trailing ave (since 1954) • Div yield 2.13% versus 10 year Fed Bond Yield of 1.55%pa)
  18. 18. Please read the disclaimer at the beginning of this report. 2016/17 Federal Budget: Major Financial Projections • Expect difficult Parliament to result in higher payments and deficit outcomes • Tax estimates were too high and likely to fall short 13/14 14/15 15/16e 16/17f 17/18p 18/19p 19/20p Payments -% Growth -% of GDP +11.8 25.7 +2.1 25.9 +3.1 25.5 +4.7 25.8 +3.3 25.5 +4.7 25.4 +4.4 25.2 Receipts -% Growth -% of GDP +3.5 23.0 +4.7 23.5 +2.3 23.5 +6.0 23.9 +6.3 24.2 +7.4 24.8 +6.6 25.1 Cash Balance (Underlying) - $ billion -% of GDP -48.5 -3.1 -39.9 -2.5 -39.4 -2.4 -37.1 -2.2 -26.1 -1.4 -15.4 -0.8 -6.0 -0.3 Source: Australian Government 2016/17 Budget Strategy and Outlook Budget Paper No. 1
  19. 19. Please read the disclaimer at the beginning of this report. Election result increases Risks of Higher Spending and Deficits • Increased Commonwealth Govt Bond issues leading to higher interest rates in coming years • Bonds likely to become more attractive relative to Term deposits Source: Australian Government 2016/17 Budget Strategy and Outlook Budget Paper No. 1
  20. 20. Please read the disclaimer at the beginning of this report. Main Revenue Items Cash Basis, $b and % change 13/14 14/15 15/16e 16/17p 17/18p 18/19p 19/20p Individuals Employment/Earnings Growth % Individual Tax as % of Total 163.6 +4.7% 0.7/2.5 48.3% 177.9 +8.7% 1.6/2.3 50.3% 188.4 +5.9% 2/2.25 51.7% 197.0 +4.5% 1.75/2.5 51.4% 210.4 +6.8% 1.75/2.75 51.3% 223.9 +6.4% 1.25/3.25 51.0% 239.7 7.1% 1.5/3.5 51.2% Companies, FBT, RRTs 72.9 +0.3% 72.4 -1% 70.0 -3.3% 74.5 +6.4% 82.1 +10.1% 90.2 +9.8% 96.5 +7.0% Superannuation 6.1 +19.8% 5.9 -3.7% 6.6 +12.9% 7.4 +11.3% 9.0 +21.4% 10.0 +11.1 10.9 9.0% Excises and Customs 35.3 +3.5% 34.6 -2.1% 34.8 +0.6% 35.8 +2.8% 37.1 +3.7% 39.7 +7.1% 42.7 +7.4% Goods and Services Taxes 51.4 +3.2% 54.5 +6.0% 57.8 +6.0% 60.9 5.4% 64.2 5.4% 67.6 5.3% 70.7 4.5% All Taxes 338.4 353.5 364.5 382.8 410.2 438.8 468.3 Personal Income Tax Bracket Creep and Increased Profits(?) main sources of Revenue Growth Source: Australian Government 2016/17 Budget Strategy and Outlook Budget Paper No. 1
  21. 21. Please read the disclaimer at the beginning of this report. Main Expense Items by Program: Increasing concentration with reducing flexibility Accrual Basis , $b and % of Total Spending 14/15e 15/16e 16/17f 17/18p 18/19 19/20p Assistance to the Aged 57.6 60.0 63.3 65.7 69.4 72.9 13.7% 13.9% 14.0% 14.1% 14.2% 14.2 Assistance to Families with Children 38.8 38.9 37.6 37.3 39.9 41.6 9.2% 8.9% 8.3% 8.0% 8.2% 8.1% Medical Services and Pharmaceutical Ben. 28.2 31.5 32.8 33.7 35.0 36.8 6.7% 7.3% 7.3% 7.2% 7.2% 7.2% Assistance to those with Disabilities 27.7 29.1 33.4 40.5 51.1 52.9 6.6% 6.7% 7.4% 8.7% 10.5% 10.3 Assistance to the States for Public Hospitals 15.5 17.2 17.9 18.9 20.0 21.1 3.7% 4.0% 4.0% 4.1% 4.1% 4.1% Total of Above as % of Total Spending 39.9% 41.0% 41.1% 42.2% 44.0% 44.0% Source: Australian Government 2016/17 Budget Strategy and Outlook Budget Paper No. 1
  22. 22. Please read the disclaimer at the beginning of this report. Budget Forecasts • Economic growth slow as Private Investment side of economy shrinks • Falling Mining Investment just being offset by increased housing investment, exports • Govt growth forecasts revised down from December 2015 MYEFO • Mining investment falling faster than expected, Non Mining Investment not growing as fast as expected • Neither will be helped by increased political uncertainty, outlook for lack of reform • Private dwelling investment growth slowing sharply • Public Final Demand growth is lifting with Infrastructure spending % change, inflation adjusted (Italicised are BH forecasts) 13/14 14/15 15/16e 16/17f 17/18f Private Investment - Dwellings 5.1 7.9 8 2 1 No. of Private Dwellings Started (‘000)* 178 200 215 220 222 Business Investment – Mining Business Investment – Non Mining -7.0 -3.7 -17.3 1.2 -27.5 -2 -25.5 3.5 -14 4.5 Private Final Demand 0.9 1 0.5 1.5 2.5 Public Final Demand 1.6 0 2.25 2.25 2.0 Source: Australian Government 2016/17 Budget Strategy and Outlook Budget Paper No. 1 *BH forecasts
  23. 23. Please read the disclaimer at the beginning of this report. Budget Forecasts • Employment and Wage Growth very slow, Population and Working age population growth slower than earlier estimated • Inflation staying lower for longer, Private Sector deflation as part of global phenomenon • Income tax Bracket Creep negatively impacting real income growth • Household Consumption growth being supported by expected further fall in Household Savings Ratio • Impacted by Consumer confidence, banks’ credit policies, Tax and Govt charges • Slow Household spending means Businesses will need to work harder and smarter to grow profits • Need to capture more market share while reducing costs 13/14 14/15 15/16e 16/17f 17/18f Household Consumption 2.5 2.7 3.0 3.0 3.0 New Motor Vehicle Sales, m* 1.12 1.2 1.35 1.40 1.43 Employment, % change to June qtr 0.7 1.6 2 1.75 1.75 Wage Price Index, % change to June qtr 2.6 2.3 2.25 2.5 2.75 Unemployment Rate, % June qtr 5.9 6.1 5.75 5.5 5.5 Labour Force Participation Rate, % June qtr 64.6 64.8 65 65 65 Household Savings Ratio, % June qtr, trend 10 9 8 7 7 Consumer Prices, % change to June qtr 3.0 1.5 1.25 2 2.25 Source: Australian Government 2016/17 Budget Strategy and Outlook Budget Paper No. 1
  24. 24. Please read the disclaimer at the beginning of this report. Consumer and Business Confidence has Dipped on Election Outcome
  25. 25. Please read the disclaimer at the beginning of this report. Net Worth continues to improve Households starting to save less but real Disposable Income and Consumption growth at twenty year lows Source: Reserve Bank of Australia Chart Pack July 2016
  26. 26. Please read the disclaimer at the beginning of this report. Supply side issues and Slowing Wages Growth Source: Reserve Bank of Australia Chart Pack July 2016 • Issues for: • Household real income growth, particularly with ongoing tax bracket creep • Company revenue growth and profitability • Interest rate outlook
  27. 27. Please read the disclaimer at the beginning of this report. (De)flation outlook frightening policy makers Source: Reserve Bank of Australia May 2016 Statement on Monetary Policy and Chart Pack July 2016
  28. 28. Please read the disclaimer at the beginning of this report. Reserve Bank Forecasts • Inflation now forecast to be below 2-3% pa policy range • Economic growth below earlier reduced potential growth rates • Slower population growth • Low productivity gains • We expect Cash rate to 1.25% by end 2016 Source: RBA Statement on Monetary Policy May 2016
  29. 29. Please read the disclaimer at the beginning of this report. Markets Expecting Cash Rate Cuts to under 1.5% • RBA wording of Press releases 3 May and 20 July indicate further cash rate cuts are likely from current 1.75% • Surprise at lower than expected inflation outcomes • Stronger $A than desired for transition of the economy • Economy not growing as strongly as expected • Housing demand outlook in Eastern cities starting to moderate • BREXIT result saw interest rates globally shift lower • Australian election closeness likely to create bias for lower rates for longer From the Minutes of the Monetary Policy Meeting of the RBA Board regarding additional information coming available from the RBA staff ahead of the August 2016 meeting: “This information would allow the Board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate.”
  30. 30. Please read the disclaimer at the beginning of this report. Term Deposit Rates likely lower for less than 12 month, higher for longer terms • Term Deposit rates spreads over wholesale are contracting as banks now have less need to increase overall retail funding. • Lending rate margins increasing • But should be an increasingly positive yield curve: • New banking rules mean most banks may have to increase longer term TDs. • Under 12 months rates likely to be at or under the cash rate in late 2016. Source: RBA Chart Pack July 2016
  31. 31. Please read the disclaimer at the beginning of this report. Non Mining Investment Expectations not Offsetting Lower Mining Investment: Most Output Growth is in Services, historically showing less capital spending Gross Investment by Major Industry Sector, $b, Current $ 10/11 11/12 12/13 13/14 14/15 15/16 4th Est 16/17 1st Est Mining 46.9 82.0 94.7 90.4 76.1 56.8 32.8 Manufacturing 12.3 13.2 9.5 9.2 8.6 8.3 7.4 Electricity, Gas & Water 6.2 5.4 5.5 5.8 5.1 5.4 6.6 Construction 5.4 4.7 5.0 4.7 6.3 3.4 2.3 Wholesale & Retail Trade 7.4 7.5 7.4 8.1 9.1 8.9 9.2 Transport, Post & Warehousing 11.6 13.7 11.1 11.2 12.5 9.9 10.6 Rental, Hiring & Real Estate 11.9 10.5 9.8 9.6 12.2 11.4 10.0 Other 17.6 17.9 17.7 19.0 20.8 19.9 19.2 Total 119.3 154.8 160.5 158.0 150.7 124.0 98.1 Source: ABS 5625.0 Private New Capital Expenditure and Expected Expenditure December Quarter, Australia, February 2016
  32. 32. Please read the disclaimer at the beginning of this report. Listed Company Profits Outcomes very Mixed but Outlook stabilising Source: Reserve Bank of Australia May 2016 Statement on Monetary Policy and Chart Pack July 2016
  33. 33. Please read the disclaimer at the beginning of this report. Share Price Gains very Dispersed, Forward Price/Earnings Ratios Up since May 2014 Driven by very low interest rates, Search for Cash Incomes and rising payout Ratios Australia Late 80s Now Dividend Yields 4 - 5% 4.3% Inflation 7% – 8% 1.5% – 2.5% 10 Year Govt Bonds 12% – 13% 1.8% - 2.5% Source: Reserve Bank of Australia May 2016 Statement on Monetary Policy and Chart Pack July 2016
  34. 34. Please read the disclaimer at the beginning of this report. $A at $US0.75 about right on current commodity prices Short term dip on changed interest rate expectations Risk to upside as global commodity supply pulls back
  35. 35. Please read the disclaimer at the beginning of this report. • Slow economic and profit growth to continue • Increased uncertainty with Brexit and Australian election results to keep interest rates very low – UK economy to slow in any case in 2017. • UK has large current account and budget deficits already – Main immediate issue is how UK and European financial markets work through impacts of UK credit rating downgrade and bank liquidity • Plenty of support ready from Bank of England, European Central Bank etc • Likely to keep Western interest rates lower for longer – Longer term issues • UK breakup: Scotland and Northern Ireland want to stay in Europe • Bilateral and Multilateral Trade issues • European security – Direct impact on Australia should be minimal Summary
  36. 36. Please read the disclaimer at the beginning of this report. • Australian election outcome adds to uncertainty – We need to get used to more volatile politics, close elections, minority party influences – Loss of faith in political, financial and economic elites not likely to pass soon • Many feel left out of economic liberalisation and Post GFC policies, Fear of change and “new” economy – Political Volatility and lack of faith likely to limit required action on regulatory and tax reform – Danger of cut in Federal Government global credit rating with flow on to Australian companies • Productivity, Workforce Participation and Industry flexibility issues not a policy focus – This has been the case for last decade at Federal, State and Local Govt levels – Longer term impacts on: • Private real Income growth, Spending, Profits and Superannuation returns • Tax revenues and public sector spending • Population and workforce growth • Portfolio and Strategies will therefore need to be worked harder Summary
  37. 37. Ben Prisk Baillieu Holst Financial Adviser Market Update
  38. 38. Please read the disclaimer at the beginning of this report. Stock Market Performance Over The Last 12 Months • MSCI World (ex-Australia) Index Performance fell 1% – Geo-political crisis’. – Emerging market concerns. – Brexit vote caused European stock prices to collapse. • Domestic S&P/ASX 200 Index fell 1% – Resource sector has fallen sharply on the back of declining demand for base level commodities from Emerging markets. 4200 4400 4600 4800 5000 5200 5400 5600 5800 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800 1850 17 Jul 15 17 Jan 16 17 Jul 16 MSCI World (ex-Australia) v S&P/ASX 300 MSCI World (ex-Aus) S&P/ASX 300
  39. 39. Please read the disclaimer at the beginning of this report. A Divergence of Returns in the Australian Market • Amidst flat performance of the broader Australian share market on the back of declining resource demand and bond yields continuing to fall in an environment of low inflation and low growth, the following sectors have found support given their defensive characteristics: – Healthcare • Exposure to Biopharmaceuticals, Medical Diagnostics, Medical Products & Devices and Hospitals. • These companies are operating in a favorable demographic - Australia’s population is ageing. – Infrastructure • Exposure to Toll Roads, Airports and Gas Pipelines. • Monopoly like assets that enjoy reliable cash flows. – Real-Estate Investment Trusts (REITs) • Exposure to Retail, Office, Commercial and Industrial Property. • Typically receive higher dividend yields from rent receipts.
  40. 40. Please read the disclaimer at the beginning of this report. 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 22 Jul 11 22 Jul 12 22 Jul 13 22 Jul 14 22 Jul 15 22 Jul 16 0 20000 40000 60000 80000 100000 120000 140000 Property v Healthcare v Utilities v Financials v Resources v 300 Accumulation Index 300 FINANCIALS 300 HEALTHCARE 300 RESOURCES 300 UTILITIES 300 ACCUM 300 AREIT A Divergence of Returns in the Australian Market
  41. 41. Please read the disclaimer at the beginning of this report. A Divergence of Returns in the Australian Market $- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 0 10000 20000 30000 40000 50000 60000 22 Jul 11 22 Jul 12 22 Jul 13 22 Jul 14 22 Jul 15 22 Jul 16 BHP v 300 Accumulation Index 300 ACCUM BHP
  42. 42. Please read the disclaimer at the beginning of this report. A Divergence of Returns in the Australian Market 20000 25000 30000 35000 40000 45000 50000 55000 60000 65000 70000 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 22 Jul 11 22 Jul 12 22 Jul 13 22 Jul 14 22 Jul 15 22 Jul 16 SYD vs 300 Accumulation Index SYD 300 ACCUM
  43. 43. Please read the disclaimer at the beginning of this report. $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 10000 20000 30000 40000 50000 60000 70000 80000 22 Jul 11 22 Jul 12 22 Jul 13 22 Jul 14 22 Jul 15 22 Jul 16 TCL v 300 Accumulation Index 300 ACCUM TCL A Divergence of Returns in the Australian Market
  44. 44. Please read the disclaimer at the beginning of this report. $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 0 10000 20000 30000 40000 50000 60000 70000 80000 22 Jul 11 22 Jul 12 22 Jul 13 22 Jul 14 22 Jul 15 22 Jul 16 300 Accumulation Index v GPT 300 ACCUM GPT A Divergence of Returns in the Australian Market
  45. 45. Please read the disclaimer at the beginning of this report. $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 110000 22 Jul 11 22 Jul 12 22 Jul 13 22 Jul 14 22 Jul 15 22 Jul 16 300 Accumulation Index v CSL 300 ACCUM CSL A Divergence of Returns in the Australian Market
  46. 46. Please read the disclaimer at the beginning of this report. • It may transpire that the Infrastructure, Healthcare and REIT sectors continue to rally given they are high quality, defensive plays. • However, we can’t avoid the fact that they are trading at historically high multiples with share prices outpacing earnings in many cases. • In our view, we believe it is prudent to be at least taking partial profit from these “Expensive Defensives” and re-weighting portfolios accordingly. A Divergence of Returns in the Australian Market
  47. 47. Please read the disclaimer at the beginning of this report. Brexit • UK’s divorce from the European Union will be a long and drawn out process. • Both growth and inflation expectations for the region have already been reduced by the IMF casting a further shadow over the Eurozone. • Australian companies remain relatively sheltered. • Our share market witnessed overblown negativity directly after the vote and has since recovered. • Continued ramifications on global cash rates ensures that the search for yield will continue for the indefinite future.
  48. 48. Please read the disclaimer at the beginning of this report. • The Brexit Vote provides a valuable reminder of the underlying strength and resilience of the Australian Financial System. • Confirmation of this by APRA, Treasury, the RBA and ASIC provides a vote of confidence in the big four banks. • Tough global conditions for the domestic sector, – Capital raising requirements. – Declining demand / supply of credit. – RBA rate cuts impact earnings. – Payout ratios. • Valuations do not appear stretched. Australian Banks and the Search for Yield ANZ CBA NAB WBC Cash yield 6.6% 5.6% 7.6% 6.3% Grossed up yield 9.40% 7.94% 10.92% 9.01% Price since high -33% -24% -31% -25%
  49. 49. Please read the disclaimer at the beginning of this report. Chinese Tourism and the Consumer • The rise of the Chinese tourist and consumer is not breaking news. • The market will often focus on short term valuations, however we have identified this to be a strong long term thematic. • Chinese visitors spent $7.7b in Australia last year. • This should be a positive for these Australian companies: • Sealink Travel Group • Mantra Group • Blackmores Source: Wind, CEIC, Fidelity Investments International
  50. 50. Please read the disclaimer at the beginning of this report. -$0.30 $0.20 $0.70 $1.20 $1.70 $2.20 $2.70 $3.20 $3.70 $4.20 $4.70 10000 20000 30000 40000 50000 60000 70000 80000 90000 100000 110000 18 Oct 13 18 Apr 14 18 Oct 14 18 Apr 15 18 Oct 15 18 Apr 16 SLK v 300 Accumulation Index 300 ACCUM SLK Chinese Tourism and the Consumer
  51. 51. Please read the disclaimer at the beginning of this report. $(0.50) $0.50 $1.50 $2.50 $3.50 $4.50 $5.50 0 20000 40000 60000 80000 100000 120000 140000 20 Jun 14 20 Dec 14 20 Jun 15 20 Dec 15 20 Jun 16 MTR v 300 Accumulation Index 300 ACCUM MTR Chinese Tourism and the Consumer
  52. 52. Please read the disclaimer at the beginning of this report. $(20.00) $30.00 $80.00 $130.00 $180.00 $230.00 10000 30000 50000 70000 90000 110000 130000 22 Jul 11 22 Jul 12 22 Jul 13 22 Jul 14 22 Jul 15 22 Jul 16 BKL v 300 Accumulation Index 300 ACCUM BKL Chinese Tourism and the Consumer
  53. 53. Please read the disclaimer at the beginning of this report. • Global Risks remain elevated, no asset class is offering compelling value. – Adjust expectations. – Consider the total return on investment. • Be selective, know where your capital is invested. – Establish concentrated positions. – Dollar cost average. • Continually review your established strategy. – Take profits and if necessary crystalise losses. • Identify companies that can grow regardless of the economic environment, but don’t pay too much. – Be patient. Summary
  54. 54. Helen Dundon Baillieu Holst Financial Adviser Summary & questions
  55. 55. The Baillieu Holst Adelaide Team
  56. 56. Please read the disclaimer at the beginning of this report. To discuss any of the services available at Baillieu Holst, please contact us. 08 7074 8400 info@baillieuholst.com.au www.baillieuholst.com.au Melbourne Head Office Phone +61 3 9602 9222 Email melbourne@baillieuholst.com.au Bendigo Office Phone +61 3 4433 3400 Email bendigo@baillieuholst.com.au Geelong Office Phone +61 3 5229 4637 Email geelong@baillieuholst.com.au Newcastle Office Phone +61 2 4037 3500 Email newcastle@baillieuholst.com.au Perth Office Phone +61 8 6141 9450 Email perth@baillieuholst.com.au Sydney Office Phone +61 2 9250 8900 Email sydney@baillieuholst.com.au Adelaide Office Phone +61 8 7074 8400 Email Adelaide@baillieuholst.com.au

×