Legg Mason’s affiliate Martin Currie has said that the earning per share (EPS) revisions by brokers post-results had the worst ratio of downgrades to upgrades in over 10 years, despite the ‘green shoots’ in consumer spending and company results being broadly in line with expectations.
According to Martin Currie Australia’s chief investment officer, Reece Birtles, the ‘green shoots’ post election lending relaxation by the Australian Prudential Regulation Authority (APRA) and tax cuts helped lift consumer sentiment and spending.
“While it was understandable that the market had expected to see weak results due to the ongoing global uncertainty since last reporting season, we believe that the market was expecting a much more optimistic outlook going forward,” he said.
“Instead, managements across the boards talked about ‘air pockets’ in their outlook such, as low infrastructure spending and advertising, and the forecasts for the period ahead were very conservative.”
Further to that, Birtles stressed that the poor revisions by brokers and conservatives outlook from company management masked some of the positive signs and fundamental themes, which included:
- Consumer spending is better than expected
- The housing market was stabilising
- The funding environment was improving, but credit availability issues remained
At the same time, Birtles warned that B2B demand was still weak due to lack of...