Deutsche Bank is taking some risk “off the table” with its Australian equities strategy.
In a note to clients, DB says it is pulling back because its measure of earnings data — the profit pulse — has weakened, and the outlook for the next few months is soft.
The reasons the outlook isn’t so rosy, according to DB: Chinese momentum remains “muted”, Europe has disappointed and consumer and business sentiment has weakened. You can blame the budget, in part, for that last one.
“Without the cushion of cheap valuations, we are sufficiently concerned to take some risk off the table,” the note says.
“That said, we are not moving outright defensive – we continue to expect a stronger earnings environment to emerge later in the year.”
This means cutting mining from overweight to a slight underweight, as well as remaining overweight on Energy and underweight banks.
DB is also retaining an exposure to Australian housing, but adding REITs, insurance and healthcare.
As part of its strategy update DB has explained which sectors it likes:
As well as the ones it will avoid for the time being:
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