Weekly Impressions - Competition amongst banks and supermarket retailers intensifies

Sam Ferraro

Global Founders Funds Management

The banks and supermarket retailers dominated financial market developments in Australia over the past week. Investors were disappointed by full year results from ANZ and NAB, with the stocks falling by 6-7% over the week. Evidente discusses (again) why the lift in capital requirements does not amount to higher input costs for the banks. Analysts have downgraded the sector’s dividend outlook for a while now, due primarily to the fact that the majors are no longer receiving the big free kick of lower bad & doubtful debt charges. Woolworths was down 13% following another profit warning, while Wesfarmers was part of the collateral damage of what appears to be a renewed supermarket price war. With the new Woolworths Chairman having swept the slate clean, I suggest that the downside risk to Woolworths is limited. Renewed strong competition amongst grocery retailers augurs well for low inflation and lower interest rates. Evidente remains of the view that the RBA will deliver more monetary stimulus at the November Board meeting on Melbourne Cup Day. (VIEW LINK)


Sam Ferraro
Senior Portfolio Manager
Global Founders Funds Management

Managing Director of Global Founders Funds Management, Sam has over 20 years experience in financial markets, with Merrill Lynch, JBWere and Goldman Sachs.

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