Credit Suisse is sticking to its outlook for Australian equities despite a disastrous start to the year.
The investment bank sees the ASX 200 index hitting 6000 by year end. Today the index is running well below 5000.
“The macro outlook for Australia Inc remains insipid,” write analysts Hasan Tevfik and Damien Boey in a note to clients.
“Both the Chinese and Australian economies are in transition and demand is set to remain sluggish. But it is clear Aussie companies are doing their best with a bad macro situation. They are cutting costs, questioning new capex and reviewing underperforming assets.”
Credit Suisse expects the uninspiring macro outlook to continue.
“Aussie corporate management need to remain vigilant,” the analysts write.
In their first Australian Investment Strategy report for 2016, Tevfik and Boey screen for companies expected to restructure. The same list last year provided positive returns and outperformed the market.
The list they came up with this time — 16 companies — highlights companies reducing capital spending, divesting assets, cutting costs and repositioning the business. It includes BHP Billiton, Suncorp and Qantas.
Here’s the full list:
Tevfik and Boey expect the bull market in Aussie equities, which began towards the end of 2011, to continue.
“Since then total returns for the ASX 200 have been more than 50%,” they write. “Of course, returns would have been considerably higher if the Aussie bull didn’t have a bear within.”
Commodity stocks lost 30% over the same time. Financials gave a 100% return.
“There are just 28 commodity stocks in the ASX 200 now, there were 64 in 2011,” the analysts say. “At this rate of loss we will say goodbye to our last commodity dinosaur in 2020.”