VALUATION DASHBOARD Prices as at Australian Open [email protected]+612 8247 3101 Source: Wilson HTM, Bloomberg Source: Bloomberg Quantitative Strategy - Valuation Dashboard Current Market Theme - Sovereign Risk Issued by Wilson HTM Ltd ABN 68 010 529 665 - Australian Financial Services Licence No 238375, a participant of ASX Group and should be read in conjunction with the disclosures and disclaimer in this report. Important disclosures regarding companies that are subject of this report and an explanation of recommendations can be found at the end of this document. Tuesday, 17 September 2013 1 Week Price Changes in Major Asset Classes 11.3 6 7 8 9 10 11 12 13 Aug-94 Aug-96 Aug-98 Aug-00 Aug-02 Aug-04 Aug-06 Aug-08 Aug-10 Aug-12 PE This shows the P/E of the stock at the 10th percentile P/E in the ASX 100 - i.e. the cheapest stocks 250 236 200 220 240 260 280 300 320 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Italy Spain Sovereign risk was the theme for 2012 holding prices back. Going into 2013 sovereign debt has the potential to come to a head but has faded as a market key theme. The RBA minutes out this morning continue to point to a slow Australian economy, with retail spend, capex plans and employment being weak. The only (domestic) positive the RBA could see was nascent signs of growth in housing construction. One of the concerns over the next year has to be housing prices which continue to increase without sparking a construction boom. At that point the RBA will need to consider which is more important - keeping rates low to encourage growth in a weak Australian economy or restrain interest rates to avoid a (bigger) housing bubble... more to come on this theme over the next few months I fear. The second thing I note this week is the increasing P/Es in the mid caps and at the bargain end of the market (see chart below) - the hunt for value is getting increasingly difficult. Interactive charts are at http://bit.ly/oecTbW Italy opening up a risk premium over Spain recently Chart of the Week: The ASX 100 "Bargain Bin" - 12m forward P/E Small Ords ASX 200 China US Eur Japan AUD / Yen AUD / EUR AUD / Yuan AUD / USD US Junk US BBBCorp US 10y+Gov't US 1-3yGov't Au 1-3yGov't Au 3-5yGov't Au 10y+Gov't Au BBBCorp Aust. Resi -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% Equities Fixed Interest FX Residential Property Only twice in 20 years has its been harder to find a bargain - pre financial crisis and pre-tech boom
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Issued by Wilson HTM Ltd ABN 68 010 529 665 - Australian Financial Services Licence No 238375, a participant of ASX Group and should be read in conjunction with the disclosures and disclaimer in this report. Important disclosures regarding
companies that are subject of this report and an explanation of recommendations can be found at the end of this document.
Sovereign risk was the theme for 2012 holding prices back. Going into 2013 sovereign debt has the potential to come to a head but has faded as a market key theme.
The RBA minutes out this morning continue to point to a slow Australian economy, with retail spend, capex plans and employment being weak. The only (domestic) positive the RBA could see was nascent signs of growth in housing construction. One of the concerns over the next year has to be housing prices which continue to increase without sparking a construction boom. At that point the RBA will need to consider which is more important - keeping rates low to encourage growth in a weak Australian economy or restrain interest rates to avoid a (bigger) housing bubble... more to come on this theme over the next few months I fear. The second thing I note this week is the increasing P/Es in the mid caps and at the bargain end of the market (see chart below) - the hunt for value is getting increasingly difficult. Interactive charts are at http://bit.ly/oecTbW
Italy opening up a risk premium
over Spain recently
Chart of the Week: The ASX 100 "Bargain Bin" - 12m forward P/E
1 Week Chg: ASX 200 +1% Small Ords -0% 1 Week Chg: 90d -2bp 2yr -8bp 10yr -8bp 1 Week AUD Chg: US +1% Jpn +5% Eur +3% China +1%
1 Week Chg: BBB Yield -7bp CDS -1bp 1 Week Chg: 5 Capital City 1 Week Chg: US Aust.Source (all charts): Wilson HTM, Thomson Reuters, Bloomberg, Thomson Reuters, RP Data
+0.3%
1. Valuation Stats – Australian Equities 3. Valuation Stats – International Equities
Section 5: Valuation Stats - Australian Residential Property
Recent Price Performance Net Rental Yield* vs Equity Dividends vs Borrowing Costs
HIA New Home Sales
Source (all charts): Wilson HTM, Bloomberg, RBA, RP Data, Rismark, ABS
* Houses and units are adjusted for estimated stamp duty, rental management costs, capital spend, maintenance and other typical costs. Values are adjusted for the profile of typical rental stock.
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