Mathan Somasundaram

Macro outlook: Central bank currency wars, political election cycles and corporate survival mode will continue to put downward pressure on growth and interest rates. China, Japan and Europe will need more stimulus to work through further growth slowdown, while the US economy will also run into the slowing global growth headwind. The global trade to chase the US interest rate cycle and European/Japanese QE driven equities are unwinding as the reality of the currency war becomes clearer. Growth in the US is likely to pull back while Euro, Japan and China recovery will take time. Australian industrials (i.e. ex-financials) have been sold down on the currency trade and the market risk/return profile. We continue to expect to see the 2015 currency trade reverse as yield premium widens and the USD weakens. Globally diversified industrials with good growth and yield to value outlook will continue attract investors looking for a premium to bond return. Industrials with positive macro outlook will continue to deliver lower risk option in global macro volatility. (VIEW LINK)


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