Credit Suisse's top two ASX retailers + Macquarie's new favourite Big Bank

The Morning Wrap

Livewire Markets

Welcome to Charts and Caffeine - Livewire's pre-market open news and analysis wrap. We'll get you across the overnight session and share our best insights to get you better set for the investing day ahead.




Source: Forex Factory

The RBA meeting minutes are out today, and investors will be looking for clues about why the Reserve Bank decided to hike rates by only 25 basis points instead of the expected 50. It will also provide guidance as to whether the pivot is likely here to stay.

Also of interest, Kiwi CPI (spoiler, it's going to be hot) and Chinese GDP. And speaking of China, let's talk about the National People's Congress right now. 


This week and in all likelihood, Xi Jinping will enter a relatively unprecedented third term as President of the People's Republic of China. Only one other Chinese leader (Mao Zedong) has done what Xi is about to do. 

Sunday saw the start of the twice-a-decade event, with Xi delivering a two-hour speech on the themes you expected were going to be addressed:

  • No, a pivot away from zero COVID is not happening
  • Yes, Taiwan is China's concern, and China's alone
  • It will go all out to stop separatist movements
  • Economic development is still the top priority
  • Other new policy goals include the environment, winning the war on tech
  • The property debacle is not sorted just yet

On that last point, Reuters reporting suggests China's real estate developers are delaying debt restructuring moves until after the congress, hoping the gathering offers clues on how Beijing plans to stabilise the embattled sector. That means liquidation is still a very real possibility.

Remember - Evergrande's debt alone is in excess of US$300 billion. And that's just one company.


As US quarterly earnings season has arrived (the banks kicked it off late last week), I thought we'd take a look at this chart from Bank of America. This is a chart representing the number of articles on negative pre-announcements in the US. It used to be a way to cool the market's expectations of what the final numbers will be. Now, it's one heck of a forward indicator as to whether an earnings recession is coming. Watch this space.

The Livewire team will be covering US earnings season in a slew of wires coming over the next few weeks. It all kicks off with Goldman Sachs (and a wrap of the other banks), written by David Thornton later this week.


It's all about consumers in our stocks to watch today. Credit Suisse's Grant Saligari has penned a note on consumer discretionary stocks - and in particular, which companies have the most earnings upside potential in them. Later yet, we'll delve into the Big Banks and a new note from Macquarie which has a cheeky upgrade hiding in plain sight.

First, let's deal with Credit Suisse. Saligari argues JB Hi-Fi (ASX: JBH) and Premier Investments (ASX: PMV) will have the lowest tail risk post-quarterly update season. Although the consensus already has significant upside priced in, Saligari argues you need to be careful of the assumptions already in place:

The strength of retail in the September quarter has generally not been reflected in consensus estimates and there is upside risk across most of our coverage into the September quarterlies. 

Case in point - take Harvey Norman (ASX: HVN). Saligari argues the company has wider margin dispersion and higher tail risk in the leisure retail space - hence why HVN is not getting as much love as the other two companies mentioned.

Now, we move on to Macquarie and its aptly titled note:

What do you reckon Governor Lowe's choice of drink is?

While the analysts had already priced in some upside in a recent note, they didn't think how good it would actually be. For any insight on that, look into last week's Bank of Queensland result. Now, the upside earnings potential could be as much as 10% - as this next chart shows.

As a result of the change in the base case, Macquarie has changed its order for Big Bank preferences. The new order is NAB, CBA, ANZ, and WBC. But, as is with Credit Suisse, there is an important warning:

We continue to see a very wide divergence between banks’ short and medium-term outlooks. We do not expect the market to put a high multiple on margin beat that is unlikely to last. On the one hand, the sector should continue to perform well throughout the earnings upgrade cycle.


One for the bulls. 

Hans Lee wrote today's report. 


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The Morning Wrap
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Livewire and Market Index's pre-opening bell news and analysis wrap. Available weekday mornings and written by Chris Conway, Kerry Sun, and Hans Lee.

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