While reporting season in Australia has been affected by negative sentiment on politics, financial conditions and house prices, politics also created an interesting dynamic’ for dividends and capital management, according to Martin Currie.
This resulted into a higher number of misses than hits between actual company results and what broker analysts had forecast for earnings per shares (EPS).
Martin Currie Australian’s chief investment officer, Reece Birtles, said that sales or revenue results were mostly in-line with consensus expectations, implying that consumer spending may not have necessarily fallen as far as feared.
Another important factor in a play were proposed franking changes which, according to the firm, which would result in boards taking the possibility of government change very seriously and ensuring franking credit economic value did not get lost to shareholders.
“Apart from the loss of value of franking credits to retirees, our biggest concern with proposed changes is that the choice of investment vehicle (pooled versus segregated) will result in different value attributable to taxpayers of the same status,” the company said.
The reporting season also confirmed key themes across sectors, with resources and an offshore-exposed stocks sectors performing stronger than the financial and defensive names, such as the consumer staples.
“We believe the lacklustre profit results are due to the economic and political uncertainty since August 2018. Politics, financial conditions and house prices are clouding sentiment versus Australia’s strong employment market and fiscal position that is likely to be used to boost the economy leading into an election,” Birtles said.