UBS equity strategy
David Cassidy, UBS Chief Strategist gives his insights on the Australian share market correction in September and early October.
This video forms part of UBS Neo, now included in AustralianSuper’s Member Direct option.
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We think market prospects from here are much improved from where we were about a month ago. Firstly the valuation of the Australian market looks a lot better now...
We’ve seen the price earnings ratio of the market move back from 14.7 times expected earnings about a month ago to about 13.7. So that compares to a long-term average of 14.4, so valuations look better. And secondly I think the fall in the Australian dollar we’ve seen over the past month also lays the foundations for a better corporate earnings backdrop going forward.
I think we’ve seen an unusual combination of high-dividend yield stocks and cyclical stocks underperforming over the past month, which has been interesting. US dollar earners have done best on average but not all US dollar earners have done well, which is also interesting.
Well, in terms of some of the US dollar earners that haven’t done that well, we think stocks like Crown Limited and Incitec Pivot look interesting here. We also think the energy sector is oversold. And in the domestic cyclicals, we think it’s interesting that stocks like Boral and CSR underperformed. They’re beneficiaries of the strong housing construction cycle, so we’d be recommending those stocks at these levels.