Beware of those companies exposed to a falling AUD
I believe the market hasn’t fully factored in the negative effect of the falling Australian dollar on importing companies. Therefore sectors such as retail and distribution companies have the potential to surprise on the downside. The AUD has fallen 22% from USD94c to USD72.8c over the past twelve months and fallen 11% from USD81.5c six months ago. The significant fall in the Australian dollar has the ability to dramatically reduce margins for companies importing goods from offshore, the effects of which will be seen over the next several reporting periods. I would be especially careful about investing in discretionary retail stocks that are exposed to this theme and would wait until more clarity on currency/margins is given from these companies at reporting date before deciding to invest.
Simon joined Cadence Capital in 2013 as a Portfolio Manager. Prior to joining Cadence, Simon was a Portfolio Manager at Platypus Asset Management for 8 years. After completing a Bachelor of Engineering (Chemical) (Honours), Bachelor of Commerce...
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