Director - Research, Consulting and Advisory, BondAdviser

Nicholas Yaxley

Director - Research, Consulting and Advisory

Australian bonds & fixed income research

BondAdviser

BondAdviser is the central reference point for intelligent information on Australian fixed income markets. We help you make informed decisions by providing unbiased research, transparent pricing data, analytics, portfolio tools and education.

BondAdviser has the broadest coverage of retail-accessible ASX-listed and over-the-counter Australian bonds and fixed income securities. We make it easy for you to review and compare investments before you place an order with your broker or dealer.

Thematic (Sector/Industry)

In <a href="https://www.bondadviser.com.au/blog/the-demand-we-have-been-waiting-for" target="_blank">November 2016</a> we stated a large proportion of redemptions would be reinvested in existing corporate issues to achieve some degree of sectoral diversification away from the banks. Since then, the demand/supply imbalance has squeezed trading margins on corporate hybrids to the point where some security valuations are being stretched from a trading margin risk perspective.Although we expect tight supply dynamics to continue and support expensive valuations, particularly for corporate listed securities, new investors should be aware of the inherent risk. For investors already holding these securities there is probably no reason to sell as scheduled corporate redemptions will continue to intensify demand in a relatively small market. We believe this situation of demand over supply will persist. However, given valuations are not reflective of risk profiles, we will be reviewing our recommendations if corporate hybrid margins continue to tighten.

In November 2016 we stated a large proportion of redemptions would be reinvested in existing corporate issues to achieve some degree of sectoral diversification away from the banks. Since then, the demand/supply imbalance has squeezed trading margins on corporate hybrids to the point where some security valuations are being stretched from a trading margin risk perspective.Although we expect tight supply dynamics to continue and support expensive valuations, particularly for corporate listed securities, new investors should be aware of the inherent risk. For investors already holding these securities there is probably no reason to sell as scheduled corporate redemptions will continue to intensify demand in a relatively small market. We believe this situation of demand over supply will persist. However, given valuations are not reflective of risk profiles, we will be reviewing our recommendations if corporate hybrid margins continue to tighten.

Valuations Stretched on ASX-Listed Corporate Hybrids

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Equity Bottom-Up

Ahead of Brickworks' first-half 2017 result, due on March 23, we make minor changes to our underlying EPS estimates (up 3% in 2017, up 1% in 2018) to reflect slightly stronger cost-out in the Building Products division. We also include AUD 50 million of property profits from the sale in December 2016 of Oakdale West as a significant item.We maintain our 13.70 DCF-based fair value estimate. (A recent cut to our <a href="https://www.smartkarma.com/entities/323" target="_blank" data-smartkarma-citation="entities:323:1">TPG Telecom Ltd (TPM AU)</a> fair value and upgrades to <a href="https://www.smartkarma.com/entities/4414" target="_blank" data-smartkarma-citation="entities:4414:1">New Hope Corp Ltd (NHC AU)</a> results…

Ahead of Brickworks' first-half 2017 result, due on March 23, we make minor changes to our underlying EPS estimates (up 3% in 2017, up 1% in 2018) to reflect slightly stronger cost-out in the Building Products division. We also include AUD 50 million of property profits from the sale in December 2016 of Oakdale West as a significant item.We maintain our 13.70 DCF-based fair value estimate. (A recent cut to our TPG Telecom Ltd (TPM AU) fair value and upgrades to New Hope Corp Ltd (NHC AU) results…

Expected Rerate of TPG To Support Brickworks' Investment Portfolio; Shares Fairly Valued

Energy Expert

Thierry Bros, PhD

Thierrybros.com

Brexit negotiations are likely to start soon. Everyone is looking at the consequences on forex and on the UK financial sector. But who could benefit from decorrelation of energy prices between the UK and the EU?Following the policy paper " <a href="https://www.oxfordenergy.org/publications/brexits-impact-gas-markets-brext-security-supply-uk-ireland/" target="_blank">Brexit's impact on gas markets: Brexit and security of supply for the UK and Ireland</a>" just published by Oxford Institute for Energy Studies, this insight looks at the Brexit's impact on energy stocks.As the outcome of Brexit is still unknown, we can only draft…

Brexit negotiations are likely to start soon. Everyone is looking at the consequences on forex and on the UK financial sector. But who could benefit from decorrelation of energy prices between the UK and the EU?Following the policy paper " Brexit's impact on gas markets: Brexit and security of supply for the UK and Ireland" just published by Oxford Institute for Energy Studies, this insight looks at the Brexit's impact on energy stocks.As the outcome of Brexit is still unknown, we can only draft…

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Macroeconomics

<ul><li>Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on Tuesday.  Real rates have effectively lifted in the first half of CY2016, with the 25 basis point cut to the OCR in May only partially offsetting the 50 basis point decline in underlying inflation.</li><li>Consequently, Evidente believes that the central bank should deliver another rate cut this week of 25 basis points.  With the Governor’s ten year term about to end in September, surely Mr Stevens will not want to leave a legacy of have tolerated a 50 basis point undershoot on the RBA’s inflation target?</li><li>Since its launch a month ago, the key macro principle guiding Evidente’s model portfolio has been the prospect that interest rates will remain low for an extended period due to the shortfall in aggregate demand.  As a result, the portfolio retains a strong defensive bias, with an overall beta of less than 0.85.  Over the past month, the portfolio delivered alpha of 1.2%, reflecting stock selection within the small cyclical budget, including overweights in MND (+41%), BSL (+32%), MYR (+19%) and PMV (+14%). </li></ul>

Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on Tuesday.  Real rates have effectively lifted in the first half of CY2016, with the 25 basis point cut to the OCR in May only partially offsetting the 50 basis point decline in underlying inflation.Consequently, Evidente believes that the central bank should deliver another rate cut this week of 25 basis points.  With the Governor’s ten year term about to end in September, surely Mr Stevens will not want to leave a legacy of have tolerated a 50 basis point undershoot on the RBA’s inflation target?Since its launch a month ago, the key macro principle guiding Evidente’s model portfolio has been the prospect that interest rates will remain low for an extended period due to the shortfall in aggregate demand.  As a result, the portfolio retains a strong defensive bias, with an overall beta of less than 0.85.  Over the past month, the portfolio delivered alpha of 1.2%, reflecting stock selection within the small cyclical budget, including overweights in MND (+41%), BSL (+32%), MYR (+19%) and PMV (+14%). 

Retain Defensive Bias as the Reluctant Rate Cutter Likely to Deliver More Stimulus

Global Head of Research, Smartkarma

Mark Artherton

Global Head of Research

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
​
More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

<div class="content-highlight">The failure to use or the aggressive implementation of asset write downs in emerging markets and Asia will have far reaching implications for investors.</div> We live in a world where investors are uncertain about asset values both in financial and non-financial companies.  Whilst a lot is written about the nature of bad debts at banks, little has been comprehensively written about the balance sheets of non-financial companies.We see the following evidence in our analysis: <ul><li><div class="content-highlight">The failure of some…</div></li></ul>

The failure to use or the aggressive implementation of asset write downs in emerging markets and Asia will have far reaching implications for investors. We live in a world where investors are uncertain about asset values both in financial and non-financial companies.  Whilst a lot is written about the nature of bad debts at banks, little has been comprehensively written about the balance sheets of non-financial companies.We see the following evidence in our analysis: The failure of some…

Australia

Washington H. Soul Pattinson & Company Limited is an investment holding company. The Company owns shares and properties, coal mining, bulk handling, commercial television licensee, telecommunications carrier, merchant banking, funds management, pharmaceutical retailing, manufacture, processing and marketing of biscuits and cakes.

Washington H. Soul Pattinson and Co. Ltd (SOL AU)

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Washington H. Soul Pattinson and Co. Ltd (SOL AU)

Valuations Stretched on ASX-Listed Corporate Hybrids

In November 2016 we stated a large proportion of redemptions would be reinvested in existing corporate issues to achieve some degree of sectoral...

BondAdviser

Expected Rerate of TPG To Support Brickworks' Investment Portfolio; Shares Fairly Valued

Ahead of Brickworks' first-half 2017 result, due on March 23, we make minor changes to our underlying EPS estimates (up 3% in 2017, up 1% in 2018)...

Morningstar, Inc.

Energy: Who Could Benefit from Brexit?

Brexit negotiations are likely to start soon. Everyone is looking at the consequences on forex and on the UK financial sector. But who could...

Thierry Bros, PhD

Retain Defensive Bias as the Reluctant Rate Cutter Likely to Deliver More Stimulus

Interbank Cash Rate Futures point to a 65% probability that the RBA will cut the Overnight Cash Rate (OCR) by 25 basis points to 1.5% on...

Sam Ferraro

Beware Impairments in EM and Asia

The failure to use or the aggressive implementation of asset write downs in emerging markets and Asia will have far reaching implications for...

Mark Artherton

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