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A hungover start to 2015
The Australian sharemarket slid every day this week, to close down 3.0% – concluding its worst week since June 2013. During the week, the World Bank cut its global growth forecast for 2015 from 3.4% to 3.0%. Along with a week of poor quarterly earnings in the US, this drove increased volatility globally and sent world equity markets lower. Locally, seasonally adjusted unemployment data released yesterday came in better than expected at 6.1% versus 6.3%. The surprise fall in jobless numbers marks the second month in a row of rising employment data in Australia.
4 key equity market themes for 2015
In our first weekly investor email of the 2015 calendar year, we discuss four key themes that we expect will shape the Australian equity market this year:
Interest rate cuts in 2015: Slowing economic growth and lower inflation will lead the Reserve Bank of Australia to reduce the cash rate in 2015. The domestic economy remains sluggish and is still adjusting to the end of the mining boom, creating a large fiscal drag over the medium to longer term.
Housing market to cool somewhat: The increase in consumer discretionary spend driven, among others, by low interest rates and petrol prices along with heightened competition among banks for home loans will continue to see the Australian housing market hold up. We think that the Queensland and Victoria markets will outperform, picking up the mantle from New South Wales, which was the best performing market in 2014.
Chinese growth to continue to slow: While final numbers are still unavailable, 2014 growth figures for China should come in around 7% and we expect the Chinese economy to grow close to 6% for 2015. China continues to adjust to the various measures brought in by the government. For example, cracking down on corruption and cooling the property market. As a result, while the resource sector has been a significant underperformer over the past 12 months, it is difficult to paint a rosy picture for the companies in this sector as we move into the new year.
Equity market returns to remain below their longer term average: We need to see a pick-up in earnings growth to become more positive on equity markets. While further interest rate cuts could be positive and boost earnings, the global macroeconomic outlook remains fragile. Europe is on the cusp of falling back into a recession and interest rates in the US are set to rise this year – generally a negative for equities in the short term. We expect M&A activity to stay strong as companies search for ways to grow their businesses in this anaemic growth environment domestically.
WAM Capital Limited Share Purchase Plan and Interim Dividend
On Monday, the Board of WAM Capital Limited (WAM) announced a Share Purchase Plan (SPP), and a fully franked FY2015 interim dividend of 7.0 cents per share, an increase of 7.7% on the previous corresponding period.
The SPP will be offered to existing shareholders on the register at 9 January 2015 at the fixed price of $1.90 per share. Shareholders who participate in the SPP offer will be entitled to the 7.0 cent fully franked interim dividend (which will be paid on 30 April 2015). WAM’s share price closed at $1.99 today.
The SPP offers existing shareholders the opportunity to acquire up to $15,000 worth of ordinary shares in WAM without incurring any brokerage or other charges.
We expect to despatch a SPP Offer Booklet along with a SPP Application Form to eligible shareholders on 19 January 2015. However if shareholders have any questions on the SPP prior to receiving the Offer Booklet, please contact us on (02) 9247 6755 or consult your financial or other professional advisor.
Please click here for the full announcement.
In the Media
We have updated our website this week for press coverage of the Share Purchase Plan and new research reports on our Listed Investment Companies. Please click here to go to the media section of our website.
Chairman Geoff Wilson was interviewed in the Financial Review’s Smart Investor Magazine published today. Click here to read the article.
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