Australia Focus : So Much For A Hard Landing

The AUD charts look bad, bad, bad so its time to do some remembering.

At 6 year lows, I feel a stab of pain recollecting “My personal experience back in 2008 was a 35% loss over a 3 month long crash that dumbfounded me (AUDUSD 0.98 to 0.61). Freaking out, I did my homework and put the AUD diligently to work in the Australian stock market which netted me an equivalent 35% before quickly taking the money back in USD that caused me an opportunity loss of the AUD rebound back to 0.91 just a few months later.” https://tradehaven.net/food-for-thought-lets-all-save-in-aud-and-pass-the-worlds-low-rate-problem-to-them/

 

AUD MISSED OUT

 

The only risk I see with the AUD is its herd mentality despite a relatively benign RBA.

*RBA: BOARD JUDGED LEAVING CASH RATE UNCHANGED WAS APPROPRIATE
*RBA: A$ ADJUSTING TO SIGNIFICANT DECLINES IN COMMODITY PRICES
*RBA: ECONOMIC, FINANCIAL CONDITIONS TO INFORM POLICY STANCE
*RBA SAYS MODERATE EXPANSION IN ECO CONTINUES
*RBA SEES INFLATION CONSISTENT WITH TARGET NEXT 1-2 YEARS
*RBA: ECONOMY GROWING AT RATE BELOW LONGER-TERM AVERAGE
*RBA: EQUITY MARKETS CONSIDERABLY MORE VOLATILE OF LATE
*RBA: FURTHER SOFTENING OF CONDITIONS IN CHINA OF LATE

And the GDP (+0.2% QoQ vs 0.4% expected) and retail sales (Jul -0.1% MoM vs 0.4% expected) disappointed. So where are we now ?

The household sector is experiencing pretty subdued consumer confidence and low wages growth,” said Alex Joiner, chief economist for Australia at Bank of America Merrill Lynch. “There’s little the central bank can do to prompt households to spend, given they’ve lowered interest rates to record-low levels, and if households aren’t spending on that, another 25 or 50 basis points is probably not going to drive it materially higher.

Trying to make sense of it and finding a reason to buy at such discounted levels because it just does not make sense to short it anymore ?

 

audusd weekly 090515

 

Weekly support pivot 0.6818 and resistance 0.7089.

And the short term risks continue to pile as analysts and property developers themselves step up their tirade against property prices, which are the 10th best performer in the world according to Knight Frank as of 2Q15.

global house price index 2q15

Deutsche Bank :

AUSTRALIA PROPERTY TROUBLES

And from the head of Meriton, their biggest developer of apartments.

australia property collapse

And more …..

“Under the current mathematical metrics, House prices in any market that has the same debt levels as Australia’s can crash, and have crashed. If our housing market looks and smells like a bubble while every stakeholder denies it’s a bubble, it’s a bubble. And society will unfortunately be the biggest loser caught with its pants down when the housing market has the mother of all corrections.”  http://wolfstreet.com/2015/08/25/first-the-miners-now-the-banks-then-property-going-to-be-a-hard-landing-for-australia/

“One of the nation’s biggest home builders, Mirvac, has warned that the residential property market is slowing, with double-digit price growth coming to an end.

Mirvac chief executive Susan Lloyd-Hurwitz said there was still “significant undersupply” in Sydney but that the rampant growth of recent times was tailing off.

“It does seem that the Sydney market is close to the point at which the strong upward trajectory will end,” she said.” http://www.smh.com.au/business/property/mirvac-sees-end-to-doubledigit-house-price-growth-20150813-giyg3q.html

It is probably easier to work out that the falling AUD is a boon for offshore borrowers and a double bonus for GDP like I said a year back, “AUDUSD is negatively correlated to GDP which more or less implies that a weaker AUDUSD is good for the GDP.” https://tradehaven.net/australia-focus-recession-proof/

And a story I heard recently about a real estate agent flying in from Sydney into Shanghai on the day the market crashed 8%, intending to cut short his trip fearing a poor reception, only to sell 1/3 of his apartments even before he landed and having to release phase 2 during his sales trip because of overwhelming demand.
So much for a hard landing for now…. then again, I haven’t heard of people selling or taking profits yet.
aud update 090415
As for their other asset classes such as bonds, I cannot say I am as bullish as I was, not especially when Singapore government bond yields have overtaken Australia’s for the first time in history and I can only find about a dozen or so AUD corporate bonds that are yielding above 6% perhaps due to their issuance discipline and low tolerance for junk.
So much for a hard landing at the moment.
Leaving with the indicative prices ….
Australia Focus : So Much For A Hard Landing

*RIO TINTO PLC OUTLOOK TO NEGATIVE FROM STABLE BY S&P