7 reason why the ASX200 is eyeing all-time highs
With the ASX200 testing the ATH's seen in August 2021, the question of what exactly is driving the flows has been asked more liberally by clients - While we can point to macro factors, such as a belief that we're closer to an end in the hiking cycle, USD weakness, and a China re-opening, our analysts look at 7 of the key attractions driving the strong performance of the Aussie share market.
1) The ASX 200 trades on a 14.7x 12-month PE ratio - that's in line with 10yr average, but you get 5% expected EPS growth. Hardly blow the lights out potential returns but compared to other global equity markets, it could be worse!
2) The ASX200 is a 'value' markets and it trades on a 4.4% yield - arguably the highest yielding market in the developed world, and by some way - 47% of ASX200 listed entities have a higher div yield than the Aus 10yr govt bond (3.5%).
3) The ASX200 is leveraged to quality banking institutions who are benefiting from the higher cash rate environment- fine, the demand for credit is falling, but it's not awful at this stage and their asset mix is still of top quality and there are limited concerns around bad and doubtful debts - CBA report on 15 Feb and should highlight a decent lift in NIM, where the market feels strongly they should pay out cash to shareholders, lifting the dividend nearly 20% at FY earnings
4) There are some of the highest quality names in the materials space - for managers who want leverage to China reopening and the bullish dynamics in copper and ferrous (even in AUD), then the ASX200 has it - BHP, RIO and FMG all looking strong, and are now benefiting from a drop in production from Vale
5) Australia has the strongest GDP expected this year of any developed economy - fine, the consensus only expects GDP to average 1.8% in 2023, but that is far higher than the US, UK and EU
6) The ASX200 has excellent exposure to some of the world's highest quality healthcare stocks - CSL, COH are world-class and have been on fire recently
7) There is low leverage to tech - granted, that has seen the ASX200 underperform the NAS100 since mid-Jan, but international managers come to Australia for quality value stocks - they go to the US for high-quality tech/growth
1) The ASX 200 trades on a 14.7x 12-month PE ratio - that's in line with 10yr average, but you get 5% expected EPS growth. Hardly blow the lights out potential returns but compared to other global equity markets, it could be worse!
2) The ASX200 is a 'value' markets and it trades on a 4.4% yield - arguably the highest yielding market in the developed world, and by some way - 47% of ASX200 listed entities have a higher div yield than the Aus 10yr govt bond (3.5%).
3) The ASX200 is leveraged to quality banking institutions who are benefiting from the higher cash rate environment- fine, the demand for credit is falling, but it's not awful at this stage and their asset mix is still of top quality and there are limited concerns around bad and doubtful debts - CBA report on 15 Feb and should highlight a decent lift in NIM, where the market feels strongly they should pay out cash to shareholders, lifting the dividend nearly 20% at FY earnings
4) There are some of the highest quality names in the materials space - for managers who want leverage to China reopening and the bullish dynamics in copper and ferrous (even in AUD), then the ASX200 has it - BHP, RIO and FMG all looking strong, and are now benefiting from a drop in production from Vale
5) Australia has the strongest GDP expected this year of any developed economy - fine, the consensus only expects GDP to average 1.8% in 2023, but that is far higher than the US, UK and EU
6) The ASX200 has excellent exposure to some of the world's highest quality healthcare stocks - CSL, COH are world-class and have been on fire recently
7) There is low leverage to tech - granted, that has seen the ASX200 underperform the NAS100 since mid-Jan, but international managers come to Australia for quality value stocks - they go to the US for high-quality tech/growth
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