Experts see some upside for Aussie stocks, despite the current turbulent economic times.
"Our expectation of a softer Australian dollar in the second half of 2011 (92 US cents by year end) should boost interest from foreign investors - a group owning 40 to 45 per cent of our shares - and high corporate profits do point to a firmer sharemarket as well," says CommSec's Craig James, who sees the market dipping to 4900 mid-year and then recovering slightly by the end of December.
Toby Walker, Australian equity strategist at Morgan Stanley, says the investment house has not lowered its view of the stockmarket on the back of recent offshore events, including the Japanese catastrophe.
He says Morgan Stanley believes domestic market fundamentals remain intact.
"We are still looking for a reasonable year for equities this year, driven by earnings growth, particularly mining earnings growth," Walker says.
He adds that commodity price rises already seen are flowing into mining earnings but capital expenditure (capex), particularly mining capex, has yet to flow to the domestic sectors that service the resources industry.
"We are looking for 20 per cent growth this year, and not much [price-earnings] multiple expansion," Walker says, suggesting valuations remain attractively low.
"Our index target is 5350."
Last week BHP said it has approved US$9.5 billion worth of investments in its iron ore and coal operations, including US$6.6 billion to continue production growth at its West Australian iron ore operations.
Deutsche Bank equities strategist Tim Baker says the increased capex will help drive consumer spending, which in turn will help drive a more robust showing by industrial companies which have largely lagged their resources counterparts in earnings and share price growth.
Baker sees the benchmark stocks index at 5500 by the end of the calendar year, making him the biggest bull of the four forecasters polled here.
He says the forecast is driven, in part, by the market's relatively cheap price-earnings multiple, well below its traditional 14 or 15 times forward earnings.
"We're at a very attractive valuation of about 11 times," Baker says.
He adds that strong commodities prices will support the economy, and the stronger economy will help drive the keenly awaited pick-up in the industrial sector.
Source: Morningstar
Sunday, March 27, 2011
Subdued outlook for Aussie stocks
By Victoria Tait *
Natural disasters in Japan, New Zealand and Australia, as well as ongoing fighting in the Middle East and North Africa, have led some economists and strategists to lower their 2011 forecasts for Australian stocks.
Calendar year 2011 has brought one disaster after another with floods in Australia, earthquakes in New Zealand, and most recently, the quake, tsunami and nuclear damage in Japan rocking the region.
"The cause and effect is that GDP in Australia is going to be fairly soft," Morningstar's head of equity strategy Ross Bird says.
As a result, Bird has scaled down his forecast for the S&P/ASX 200 index to around 5100 by the end of calendar 2011 from his 5300 forecast set out in December.
"It's just because of the lost economic opportunity arising from the natural disasters. Some of that will be added back later in the year as reconstruction commences," he says.
CommSec chief economist Craig James says recent events have hit investor sentiment, resulting in a downward revision to his forecast.
"The Japanese earthquake, tsunami and nuclear shock have clearly had a depressing influence on investor confidence, together with air strikes against Libya," he says.
James says that even without events in Japan and North Africa, which have dominated headlines for the past few weeks, foreign investors' enthusiasm for Australian shares has waned due to a stalled economy.
The mining resource rent tax and the proposed carbon tax are expected to further dampen the nation's economic outlook, he says. On top of all that, the strong Australian dollar is making domestic shares relatively expensive, he says.
Even China, the bright spot, may not be enough to restore enthusiasm.
"Sure, China continues to expand, boosting earnings and profits for resource companies. But mining represents just 9 per cent of the economy," James says.
"It is the other 91 per cent that investors are worried about."
CommSec expects the S&P/ASX 200 index to stand at about 4900 points by the middle of the year and 5200 by the end of the year.
* Victoria Tait is Morningstar's online stocks editor.
Natural disasters in Japan, New Zealand and Australia, as well as ongoing fighting in the Middle East and North Africa, have led some economists and strategists to lower their 2011 forecasts for Australian stocks.
Calendar year 2011 has brought one disaster after another with floods in Australia, earthquakes in New Zealand, and most recently, the quake, tsunami and nuclear damage in Japan rocking the region.
"The cause and effect is that GDP in Australia is going to be fairly soft," Morningstar's head of equity strategy Ross Bird says.
As a result, Bird has scaled down his forecast for the S&P/ASX 200 index to around 5100 by the end of calendar 2011 from his 5300 forecast set out in December.
"It's just because of the lost economic opportunity arising from the natural disasters. Some of that will be added back later in the year as reconstruction commences," he says.
CommSec chief economist Craig James says recent events have hit investor sentiment, resulting in a downward revision to his forecast.
"The Japanese earthquake, tsunami and nuclear shock have clearly had a depressing influence on investor confidence, together with air strikes against Libya," he says.
James says that even without events in Japan and North Africa, which have dominated headlines for the past few weeks, foreign investors' enthusiasm for Australian shares has waned due to a stalled economy.
The mining resource rent tax and the proposed carbon tax are expected to further dampen the nation's economic outlook, he says. On top of all that, the strong Australian dollar is making domestic shares relatively expensive, he says.
Even China, the bright spot, may not be enough to restore enthusiasm.
"Sure, China continues to expand, boosting earnings and profits for resource companies. But mining represents just 9 per cent of the economy," James says.
"It is the other 91 per cent that investors are worried about."
CommSec expects the S&P/ASX 200 index to stand at about 4900 points by the middle of the year and 5200 by the end of the year.
* Victoria Tait is Morningstar's online stocks editor.
Thursday, January 27, 2011
December quarter CPI below expectations
By
Nicholas Grove is a Morningstar journalist.
Australia's consumer price index (CPI) rose 0.4 per cent in the December quarter 2010, following a rise of 0.7 per cent in the September quarter, the Australian Bureau of Statistics (ABS) said.
The figure was below economists' expectations, which ranged from 0.6 per cent to 0.9 per cent.
The most significant price rises were for fruit, vegetables, domestic holiday travel and accommodation, and automotive fuel, the ABS said.
Offsetting this were price falls in pharmaceuticals, deposit and loan facilities, motor vehicles, audio-visual and computing equipment, and motor vehicle repairs, it said.
The CPI rose 2.7 per cent for the year to December quarter 2010, compared with a rise of 2.8 per cent through the year to September quarter 2010, the ABS said.
According to CommSec economist Savanth Sebastian, the inflation reading all but ensures that interest rates will remain on hold next week.
"And given that interest rate settings are already restrictive, it is looking likely that the next rate hike will not take place until well into the June quarter - especially given that there are parts of the economy like construction, manufacturing and the services sector going backwards," he said in a note.
"There is no question that inflationary pressures remain the hot button issue for the Reserve Bank.
"But not only is inflation going nowhere fast, the weaker reading on producer prices earlier in the week suggests that consumer prices should remain contained in the near term."
However, ANZ senior economist Riki Polygenis said she remains concerned about the medium-term outlook for inflation.
While the Reserve Bank is likely to look through a forecast temporary spike in the next few quarters stemming from higher fruit and vegetable prices, she said underlying inflation is expected to pick up rapidly in the second half of 2011.
In a note, Polygenis said the reconstruction following the Victorian and Queensland floods will coincide with an upswing in mining investment and put an additional strain on resources from mid-2011 onwards.
"In addition, greater demand for skilled workers at a time of reduced migration is also expected to push the unemployment rate back below 5 per cent and put upward pressure on wages," she said.
"We also note that this is occuring at a time of higher global agricultural price inflation as well as higher crude oil prices, both of which will ultimately feed through to domestic inflation.
"As a result of these influences, ANZ is now forecasting the underlying CPI to head towards the upper end of the target band by the end of this year and to rise above 3 per cent in 2012."
Source: Morningstar.com
Australia's consumer price index (CPI) rose 0.4 per cent in the December quarter 2010, following a rise of 0.7 per cent in the September quarter, the Australian Bureau of Statistics (ABS) said.
The figure was below economists' expectations, which ranged from 0.6 per cent to 0.9 per cent.
The most significant price rises were for fruit, vegetables, domestic holiday travel and accommodation, and automotive fuel, the ABS said.
Offsetting this were price falls in pharmaceuticals, deposit and loan facilities, motor vehicles, audio-visual and computing equipment, and motor vehicle repairs, it said.
The CPI rose 2.7 per cent for the year to December quarter 2010, compared with a rise of 2.8 per cent through the year to September quarter 2010, the ABS said.
According to CommSec economist Savanth Sebastian, the inflation reading all but ensures that interest rates will remain on hold next week.
"And given that interest rate settings are already restrictive, it is looking likely that the next rate hike will not take place until well into the June quarter - especially given that there are parts of the economy like construction, manufacturing and the services sector going backwards," he said in a note.
"There is no question that inflationary pressures remain the hot button issue for the Reserve Bank.
"But not only is inflation going nowhere fast, the weaker reading on producer prices earlier in the week suggests that consumer prices should remain contained in the near term."
However, ANZ senior economist Riki Polygenis said she remains concerned about the medium-term outlook for inflation.
While the Reserve Bank is likely to look through a forecast temporary spike in the next few quarters stemming from higher fruit and vegetable prices, she said underlying inflation is expected to pick up rapidly in the second half of 2011.
In a note, Polygenis said the reconstruction following the Victorian and Queensland floods will coincide with an upswing in mining investment and put an additional strain on resources from mid-2011 onwards.
"In addition, greater demand for skilled workers at a time of reduced migration is also expected to push the unemployment rate back below 5 per cent and put upward pressure on wages," she said.
"We also note that this is occuring at a time of higher global agricultural price inflation as well as higher crude oil prices, both of which will ultimately feed through to domestic inflation.
"As a result of these influences, ANZ is now forecasting the underlying CPI to head towards the upper end of the target band by the end of this year and to rise above 3 per cent in 2012."
Source: Morningstar.com
Wednesday, January 26, 2011
Global recovery gaining
THE global economic recovery is gaining traction but is "still at risk" because of eurozone debt worries and a lack of financial reform, the International Monetary Fund said overnight.
The Washington-based institution said a two-speed recovery - with advanced economies growing at a significantly slower pace than emerging economies - was shifting gears as tax cuts in the US boosted consumption.
The IMF projected the global economy's output would expand by 4.4 per cent in 2011, slightly higher than the 4.2 per cent annual rate it forecast in October.
Its latest updates, released in Johannesburg, highlighted an improving but mixed global economic picture.
"In advanced economies, activity has moderated less than expected but growth remains subdued, unemployment is still high, and renewed stresses in the euro area periphery are contributing to downside risks," the IMF said.
The Washington-based institution said a two-speed recovery - with advanced economies growing at a significantly slower pace than emerging economies - was shifting gears as tax cuts in the US boosted consumption.
The IMF projected the global economy's output would expand by 4.4 per cent in 2011, slightly higher than the 4.2 per cent annual rate it forecast in October.
Its latest updates, released in Johannesburg, highlighted an improving but mixed global economic picture.
"In advanced economies, activity has moderated less than expected but growth remains subdued, unemployment is still high, and renewed stresses in the euro area periphery are contributing to downside risks," the IMF said.
"This reflects stronger-than-expected activity in the second half of 2010 as well as new policy initiatives in the United States that will boost activity this year," it added.
The global annual pace of growth, however, would still be slower than the 5 per cent seen in 2010. The banking sector remains volatile, Jose Vinals, the IMF's director of monetary and capital markets, told reporters in Johannesburg.
"More than two years after the onset of the financial crisis, global financial stability is still not assured. It is still at risk," he said.
"Banks face significant funding needs now and over the next two years. In many advanced economies, we need to deal with the legacy of the crisis by resolving financial fragilities once and for all," he added.
The IMF said a new US fiscal package passed in late 2010 was expected to boost growth in the world's biggest economy by 0.5 per cent.
The US economy had the sharpest markup by far: a 0.7 point gain to GDP growth of 3 per cent in 2011.
However, Olivier Blanchard, the IMF's director for research, said joblessness would continue to blight America.
"We have a long way to go ... we have to accept the fact that there is going to be an unemployment problem for a long time," he told AFP, also urging China to heed Washington's call to speed up the yuan's appreciation.
"It would be a good thing for China and for the rest of the world," he said.
There was no change in the 1.5 per cent growth forecast for the 17-nation eurozone or for Japan, where 1.6 per cent growth is predicted.
Growth in emerging economies remained "buoyant" but inflation pressures persist and there are signs of overheating in part from capital inflows as investors chase higher yields.
Growth in the top two Asian nations, China and India, was unrevised at 9.6 per cent and 8.4 per cent, respectively.
Sub-Saharan Africa is predicted to produce the strongest growth of any region, at 5.8 per cent.
Policymakers in the emerging economies, which account for more than two-thirds of global growth, should take steps to keep overheating pressures in check, the 187-nation institution said.
The IMF also warned of risks from the financial and debt crises in eurozone countries such as Greece and Ireland, amid tepid progress in financial reforms.
"The most urgent requirements for robust recovery are comprehensive and rapid actions to overcome sovereign and financial troubles in the euro area and policies to redress fiscal imbalances and to repair and reform financial systems in advanced economies more generally," it said.
There is also a need to step-up eurozone financial support for member countries in need, and to ensure better stress tests on banks, the IMF said.
"Markets remain skittish about potential losses in the region's banks and have not been assuaged by stress tests conducted to date."
The IMF forecast commodity prices would remain high in 2011 in response to strong global demand and it hiked its oil price per barrel estimate to nearly $US90 ($90.34), from the October figure of $US79, citing robust demand.
The global annual pace of growth, however, would still be slower than the 5 per cent seen in 2010. The banking sector remains volatile, Jose Vinals, the IMF's director of monetary and capital markets, told reporters in Johannesburg.
"More than two years after the onset of the financial crisis, global financial stability is still not assured. It is still at risk," he said.
"Banks face significant funding needs now and over the next two years. In many advanced economies, we need to deal with the legacy of the crisis by resolving financial fragilities once and for all," he added.
The IMF said a new US fiscal package passed in late 2010 was expected to boost growth in the world's biggest economy by 0.5 per cent.
The US economy had the sharpest markup by far: a 0.7 point gain to GDP growth of 3 per cent in 2011.
However, Olivier Blanchard, the IMF's director for research, said joblessness would continue to blight America.
"We have a long way to go ... we have to accept the fact that there is going to be an unemployment problem for a long time," he told AFP, also urging China to heed Washington's call to speed up the yuan's appreciation.
"It would be a good thing for China and for the rest of the world," he said.
There was no change in the 1.5 per cent growth forecast for the 17-nation eurozone or for Japan, where 1.6 per cent growth is predicted.
Growth in emerging economies remained "buoyant" but inflation pressures persist and there are signs of overheating in part from capital inflows as investors chase higher yields.
Growth in the top two Asian nations, China and India, was unrevised at 9.6 per cent and 8.4 per cent, respectively.
Sub-Saharan Africa is predicted to produce the strongest growth of any region, at 5.8 per cent.
Policymakers in the emerging economies, which account for more than two-thirds of global growth, should take steps to keep overheating pressures in check, the 187-nation institution said.
The IMF also warned of risks from the financial and debt crises in eurozone countries such as Greece and Ireland, amid tepid progress in financial reforms.
"The most urgent requirements for robust recovery are comprehensive and rapid actions to overcome sovereign and financial troubles in the euro area and policies to redress fiscal imbalances and to repair and reform financial systems in advanced economies more generally," it said.
There is also a need to step-up eurozone financial support for member countries in need, and to ensure better stress tests on banks, the IMF said.
"Markets remain skittish about potential losses in the region's banks and have not been assuaged by stress tests conducted to date."
The IMF forecast commodity prices would remain high in 2011 in response to strong global demand and it hiked its oil price per barrel estimate to nearly $US90 ($90.34), from the October figure of $US79, citing robust demand.
Source: news.com.au
Extra time to lodge and pay monthly acvtivity statements
Tax Commissioner Michael D’Ascenzo has given extra time for all businesses in Queensland and the Tweed to lodge December monthly activity statements.
“The damage to infrastructure and disruption to basic services as a result of the flooding is such that I have decided to allow extra time for all businesses in Queensland and the Tweed area,” D'Ascenzo said.
Businesses with addresses in Queensland and those in flood affected postcodes will automatically have their lodgement and payment dates deferred for the December monthly activity statements from the original due date of 21 January 2011 to 21 February 2011. They will not need to apply for a deferral. If deferrals to later dates have already been approved, they will still apply.
“People may also consider using electronic lodgement of forms and elect to have payment of refunds via electronic funds transfer,” D’Ascenzo said.
Businesses may check whether a deferral has been received through the Business Portal or by contacting the ATO’s dedicated emergency support info line on 1800 806 218.
As well, ATO Second Commissioner Bruce Quigley has announced the ATO will allow deductions without a receipt for donations up to $10 made to 'bucket appeals' for the floods in Victoria, Queensland and New South Wales.
“With floods now affecting communities across three states, we want to support community efforts to help people put their lives back on track," Quigley said.
“For donations over $10 make sure you keep your receipt so you can claim your deduction in your tax return.
“For donations made via the web, a bank or credit card statement will be enough.”
To be deductible the donation must be made to a 'deductible gift recipient'.
Most major charities are registered as 'deductible gift recipients' but if you are not sure whether an organisation is registered or not you can check on www.abr.business.gov.au.
Source: ato.gov.au
“The damage to infrastructure and disruption to basic services as a result of the flooding is such that I have decided to allow extra time for all businesses in Queensland and the Tweed area,” D'Ascenzo said.
Businesses with addresses in Queensland and those in flood affected postcodes will automatically have their lodgement and payment dates deferred for the December monthly activity statements from the original due date of 21 January 2011 to 21 February 2011. They will not need to apply for a deferral. If deferrals to later dates have already been approved, they will still apply.
“People may also consider using electronic lodgement of forms and elect to have payment of refunds via electronic funds transfer,” D’Ascenzo said.
Businesses may check whether a deferral has been received through the Business Portal or by contacting the ATO’s dedicated emergency support info line on 1800 806 218.
As well, ATO Second Commissioner Bruce Quigley has announced the ATO will allow deductions without a receipt for donations up to $10 made to 'bucket appeals' for the floods in Victoria, Queensland and New South Wales.
“With floods now affecting communities across three states, we want to support community efforts to help people put their lives back on track," Quigley said.
“For donations over $10 make sure you keep your receipt so you can claim your deduction in your tax return.
“For donations made via the web, a bank or credit card statement will be enough.”
To be deductible the donation must be made to a 'deductible gift recipient'.
Most major charities are registered as 'deductible gift recipients' but if you are not sure whether an organisation is registered or not you can check on www.abr.business.gov.au.
Source: ato.gov.au
Tuesday, January 25, 2011
SMSF quarterly contributions down
By Julie May | 25 Jan 2011 | Average contributions to self-managed superannuation funds (SMSF) decreased to $6400 in the December 2010 quarter from $8300 in the September 2010 quarter, a survey conducted by SMSF specialist administrator Multiport has revealed.
Multiport chief executive John McIlroy said the decline followed a trend seen during the 2010 financial year, with the bulk of contributions made in the last quarter to 30 June.
"Interestingly, however, benefit and pension payments from SMSFs were almost twice the average inflow of contributions at around $12,000 per fund in the December quarter," McIlroy said.
Meanwhile, there were no major changes to overall market allocations as SMSFs continued with a balanced investment approach.
McIlroy said exposure to Australian equities continued to increase, with allocations rising to 41.4 per cent, but were still marginally lower than the same time a year earlier.
"SMSFs continue to have a very high weighting to the top 20 ASX-listed stocks ... showing their reliance on the big four banks and the big miners," he said.
International equities on the other hand dropped to their lowest allocation in the past 12 months, with an appreciating Australian dollar against most major currencies having a counter-effect on performance, he said.
The survey also showed that trustees maintained their exposure to fixed-interest holdings, with allocations decreasing only slightly to 11.8 per cent.
McIlroy said the overall allocation to property decreased from 16.3 per cent to 15.7 per cent and that there had been no drop in direct property allocation since December 2009.
"Due to irregularity in how often properties are valued, the decrease may not indicate disposal of the properties, rather the allocation being affected by the improved performance of other sectors," he said.
Meanwhile, cash holdings increased slightly, boosted by post 30 September dividends and distributions.
Source: Morningstar.com.au
A Welcome Message from Eva Mosler, Chartered Accountant
After five years as a senior accountant leading KPMG’s small business team on the Queensland Gold Coast, Eva Mosler has launched her own boutique accountancy practice, Pandanus Accounting.
Many accounting firms charge premium fees. Because Pandanus Accounting operates from a home office at Miami on the central Gold Coast, all client fees and charges can be kept affordable.
Ms Mosler, a member of the Institute of Charted Accountants, specialises in value for money taxation services for individuals, partnerships, trusts and companies, including GST and BAS, investment properties, retirement and small business advice.
She can provide on-site visits to the home or workplace.
Ms Mosler's client list has been growing steadily. She is offering fee reductions for small businesses, investors and individuals.
She can provide a free quotation for all tax and other accounting matters, including regular consultations throughout the year with no-rush, face to face meetings.
If you are fed up with your accountant charging exorbitant fees yet spending little time with you to explain your tax situation and other business matters, Eva Mosler of Pandanus Accounting can upgrade the standard of your accounting service, help minimise your tax payments and provide sincere business guidance.
Contact Eva Mosler by phone on (07) 5576 8514 or 0488 910 456, or email info@pandanusaccounting.com.au.
See the Pandanus Accounting Yellow Pages ad online or p114 of the A-K directory.
The Pandanus Accounting blogspot provides a free, up to date survey of interesting and relevant news relating to taxation, financial and business affairs.
The Pandanus Accounting blogspot provides a free, up to date survey of interesting and relevant news relating to taxation, financial and business affairs.
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