Sunset Strip | Aussie Afternoon Institutional Market Wrap

Aussie market started positive and then ran into selling with waning optimism and China devaluation day 3. The market still trying to digest the PBOC move despite the explanation provided to the market. The logic that Yuan has appreciated in recent years with USD and needed to come back to help manufacturing makes sense, but no one really has trust when they said 10% depreciation is off the park. Just in the last 3 days we have had more than 4% drop and we are almost certain that they will be forced to depreciate over 5% when US Fed moves on interest rates. We maintain our positive long term view on the yield trade (i.e. banks, div financials and telcos) while health care looks the best growth/currency story. We continue to like the gold sector on margin/safety aspects with recovering spot gold and falling currency. The market is now showing value and the risk return points to buying time…quality yield stocks in low growth outlook will deliver over time…stay nimble!!! (VIEW LINK)