Five offshore influences that may hold sway on local equities

Eley Griffiths

Eley Griffiths Group

Eley Griffiths Group calculates the local market’s equity risk premium each quarter. At present it sits at 6.35%, slightly more attractive than the June quarter setting. The Australian sharemarket continues to offer equity investors ample reward for the extra risk over bond returns. Local equities are a BUY at current levels. The relative outperformance of the XSO versus the ASX 100 looks set to continue, if EGG’s interpretation of current PE differentials holds true. At the time of writing, the FY16 PE ratios of small and big caps were at parity at ~ 14.8x. History has taught this manager a thing or two and one dyed- in-the-wool rule is that the market doesn’t buy small caps at sizable (15-20%) discounts to big caps. Counter intuitively, investors buy small caps at PER parity and continue this until a full blown premium differential is in place. This process can play out over a lengthy period and we may just be at the early stages of this phenomenon. Read our quarterly report including five influences that may impact local equities into 2016.


2 stocks mentioned

Eley Griffiths
Eley Griffiths Group

Eley Griffiths Group is an independent fund manager specialising in listed Australian small companies. Our investment team has been uncovering hidden opportunities in small caps since 2003.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.

Comments

Sign In or Join Free to comment