A higher net interest margin drove a 10 per cent increase in CBA’s net profit after tax, while Wesfarmers benefited from a strong performance by Kmart Group and the chemicals division. But with much of the upside for these companies already priced in, investors should be clear about valuations before buying in.
Increased traffic volumes and higher earnings have provided valuation support for the infrastructure company, ClearBridge Investments’ Shane Hurst says, with the post-COVID-19 recovery positioning the business for solid growth.
An explosive report by activist short seller Hindenburg Research led Adani Group to shelve a planned US$2.5 billion equity sale and wiped $120 billion from the multinational conglomerate’s market value. While activist short reports should be taken with a grain of salt, market observers said, some of Hindenburg’s key claims are likely valid – including that Adani was vastly overpriced.
Markets have moved sharply to reprice Chinese assets upwards after the world’s second-largest economy signalled its reopening. However, some doubt the sustainability of the current bull market, saying key ingredients for a lasting recovery are missing.
Analysts agree Australia’s big four banks are entering 2023 from a position of strength as they pass on rising interest rates to borrowers. Headwinds remain, however, and the total return picture for shareholders looks more complex.
Exchange-traded funds continued to attract inflows from investors in 2022, albeit at a slower pace thanks to rising interest rates and market volatility. Resources and mining-focused funds were clear standouts in a challenging year.
A recent survey shows 74 per cent of Australian business leaders expect profits to increase in the year ahead, despite a still-challenging outlook and sticky inflation.
This year’s recalibration of bond prices now reflects the higher interest rate environment, making future returns attractive again for fixed income in 2023 as deteriorating fundamentals threaten other asset classes.
Economists agree the outlook for house prices in 2023 is largely dependent on upcoming interest rate decisions by the Reserve Bank of Australia, and signs of weakness are already appearing. Complicating matters further, borrowers face an impending fixed-rate cliff.
The Chinese government’s announcement of less onerous isolation guidelines prompted markets to rally in anticipating of a move away from zero-COVID policies. While significant short-term challenges remain, market sources say renewed growth may be in sight, representing future opportunity.
