AUSTRALIA FOCUS : THE KOALA IS A BEAR
Gosh, can there be any more negativity on the land of sunshine, blue skies and golden coastlines ?
*S&P: COULD LOWER AUSTRALIA RATING IF BUDGET DOESN’T IMPROVE
I hardly get it because Australia’s Debt/GDP is 34.5% when Japan is running at 232%, the US at 71% and Singapore at 103%.
Thus we have the analysts all rushing out to lower their AUDUSD targets again which makes perfect sense given the commodity tumble this week, the biggest call is for US$0.60 and potentially US$0.50 in the medium term, in the wake of the CAD.
And it does not help that we are heading into the strongest El Nino on record with the big threat of drought. So how what does it behold for the AUD ?
The next Fibonacci level, of course – 0.7205 ? And a retracement ?
And we can expect Australia to take up even more of China’s global property investments from their 25% lion share in 1Q15, much of the $800 bio of outflow over the past 12 months will call Australia Home. http://www.bloomberg.com/news/articles/2015-06-30/chinese-funnel-25-of-global-property-investment-into-australia
It is hard to see the country turn about anytime soon with China licking her wounds and at this rate, the glory of economic growth will continue to belong to the G3 in the months ahead and Australia has always been a love-hate story for investors who either love it to bits or hate the life out of it.
At this moment, the Koala is a Bear !
It was a good call on the AUD bonds although we should be wary of bank capital issues.
“Bloomberg – Australia’s big four lender should boost their capital ratios by at least 2 percentage points and be among the world’s top-quartile banks, according to recommendations from the Australian Prudential Regulation Authority. These banks may need to raise more capital through either equity or debt. Based on their latest combined risk-weighted assets of A$1.5 trillion ($1.1 trillion), they may need an extra A$21.6 billion of new capital after raising A$8 billion in May.”
More room for overly financials-weighted AS51 to go lower, I expect.
Bond issuance has slowed slightly over the same period last year, down some 5.7% and I would expect it to slow as the currency continues to lose favour with global investors although we have hope of capital gains to come as market continues to speculate on the rate cuts which is a better weapon as a threat than actualised.
Not a whole lot of investment options, if you ask me.
Leaving with the indicative prices…