TenViz Tools have Buys on Aussie Dollar, Aussie Sovereign Bonds and Australian Equities (ASX200). Why so? What is the hidden message from the markets?
Well, for starters everything has its price:
- Aussie equities under performed for almost a decade and Australia now trades at 15x trailing P/E and attractive 6.5% dividend (S&P500 offers only a 2.9% dividend)
- Aussie Dollar looks really cheap. Currently, it goes for 1.4 versus a few years ago touching a parity versus the greenback.
- Of course, Australia is linked through commodities to China. Coincidentally, TenViz Tools also has a fresh Buy on Iron Ore – key Australian export staple to China (see the screenshot attached)
- There are some counter arguments to that:
- We know that Australia has a perceived housing bubble. Possibly. But Australia has by far the highest immigration rate among all G7 countries (open door immigration for professionals). Therefore, the demand for housing is at least partially, justified. And, Aussie banks are extremely well capitalized and mortgage origination is sound.
- Yes, Aussie Yield curve looks inverted at the 2Y-5Y segment, but the longer end looks OK
- NET-NET: when all Asset classes in a country get aligned as a Buy – then it tends to be a powerful combination. Last time we had a similar Buys on a Currency, Sovereign Bonds and Equities was the case of Brazil in July-August of 2018 – which at this point is the single strongest performer Globally (Yes, Bovespa is up 16.5% for the last 6 Months, while S&P500 is down 11%). See our email. So, when we have a trifecta of Buys – we take it seriously
What do you think?