Clouded by political, economic and credit uncertainty
Australian reporting season wrap 2019
19 March 2019
Our framework allows us to judge the overall pulse of the market from the top down, and assess the themes across the market that would be ‘hard to see’ when looking at each company result in isolation.
February 2019 reporting season
The Australian reporting seasons (in February and August) are important periods for markets, with much more fundamental company information available to investors than at other times in the year.
This season, however, while company fundamentals are largely intact, profit results have been clouded by the negative sentiment coming from politics, financial conditions and house prices.
Despite the lower expectations for results in the lead in, February’s results represented a relatively balanced delivery, and were especially good for sales and franked income outcomes.
While company fundamentals are largely intact, this reporting season, profit results have been clouded by the negative sentiment on politics, financial conditions and house prices. Increasing investment requirements have also reduced both company and consensus growth outlooks.
Issues companies and consumers are facing include the tight financial conditions; house prices; and the impact on consumer confidence and business formation. The large infrastructure pipeline, which should help to counter the housing downturn, is taking longer than expected to deliver. However, Australia’s government budget surplus position provides it with good monetary and fiscal options to boost the economy leading into the election.
With healing of global economic conditions on its way, the economic cycle will probably be delayed or prolonged. This will be positive for both company fundamentals and markets, and we believe it is hard to see another sell off like last year.
Market disconnects on fundamentals such as these can offer significant opportunities for research-driven stock picking.
In the full article (PDF), our team of Australian investment specialists, led by Reece Birtles, Martin Currie Australia's Chief Investment Officer, provide context to the recent company reporting season and economic environment, from both a fundamental and analytical perspective, and discuss the implications for our portfolios.
Reporting season wrap - Download full PDF