One rally underway, and another one brewing

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Livewire Markets

Miners and Banks are the two dominant sectors on the ASX. For the last few years, the miners have done the heavy lifting, and while they are a long way from former highs, there is no denying they've had a good run. Catherine Allfrey of Wavestone Capital says investors are demanding capital discipline, and she expects earnings upgrades in the year ahead. Ben Griffiths of Eley Grififths Group argued that this demand for discipline is in fact an indicator that things are just getting started. He told the Livewire Live audience:  

"The fact that this is the ruling psychology amongst professional investors almost tells me that it's so early in the evolution of the resources cycle."  

On the banks Anthony Aboud from Perpetual said the next 9 – 12 months are likely to remain torrid. However, both Aboud and Allfrey made the case that much of the bad news is now being priced in.  

Tune in to this excerpt from Livewire Live from three of Australia's leading fund managers.  

 

Key Points

  • Resources have been doing the heavy lifting, however, capital discipline remains a feature of these businesses. 
  • Catherine Allfrey from Wavestone Capital believes valuations look reasonable and expects there to be upgrades to the current earnings forecasts.
  • Ben Griffiths from Eley Griffiths Group says he fully expects exuberance to return at some stage and argues that the capital discipline is a sign that the resources rally has further to run.
  • Anthony Aboud from Perpetual says Australian banks are likely to face further headwinds over the next 9 - 12 months, but has been doing plenty of work and believes valuations are getting close to an attractive level.
  • Catherine Allfrey also argues that there is a lot of bad news priced in and the banks are trading at historically supportive price-to-book valuations.

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