Mathan Somasundaram

Aussie market started negative and went further negative as RBA opened the door for more rate cuts as the economy slows down. The global sentiment from the Japanese negative rates move on the currency war was abating while RBA delivered as expected. Despite the overnight strength in the currency, RBA comments confirmed that they will move on rates as the economy slows due to low inflation. The currency risk remains the key to short term market moves and global investors once again took profit on the big yield stocks. We maintain the view that RBA will cut in Q2 and Q3 as the economy deteriorates. The more central banks deliver support to an inefficient growth story, the longer the growth will remain lower. The longer the low growth remains, the longer the yield trade will be the main thematic. Aussie market dividend yield to bond yield gap is the highest it has been in the last 15 years…including the GFC. Commodities are likely to weaken as the week rolls into Chinese New Year. (VIEW LINK)


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